[Insight & Opinion] Digital Sovereignty and Trade Friction: Solutions to Korea-U.S. Digital Legislative Conflict

Tensions between South Korea and the United States are gradually escalating over recent digital legislation initiatives in Korea. As the Korean government and National Assembly discuss and push forward the so-called "Platform Competition Promotion Act" (tentative name) and amendments to the Information and Communications Network Act ahead of 2026, the U.S. government, Congress, and industry have publicly expressed concerns. The United States holds the position that such legislation could function as a non-tariff barrier in the digital sector if it adversely affects its own big tech companies (large information technology firms), and that it could also raise issues regarding consistency with the national treatment principle under the Korea-U.S. Free Trade Agreement (FTA).

The U.S. has raised two major issues. The first is the concept of preemptively designating market-dominant platforms and fundamentally prohibiting certain behaviors such as self-preferencing, as envisioned in the Platform Competition Promotion Act. The second is the discussion on amending the Information and Communications Network Act to strengthen platform responsibility for the distribution of false or manipulated information. The argument is that such regulations would impose a relatively greater burden on American companies like Google, Apple, and Meta, while Chinese platforms such as Aliexpress and Temu could benefit as they fall outside the effective reach of enforcement. If this perception accumulates, there is a risk that digital regulations could escalate into trade conflicts. A pragmatic approach is needed to mitigate friction and ensure fairness in the digital economy.

First, there needs to be a flexible reconsideration of the preemptive regulatory approach that designates certain companies as "gatekeepers" in advance. The European Union (EU), through its Digital Markets Act (DMA), preemptively designated gatekeepers and introduced strong behavioral regulations, which subsequently triggered similar trade and diplomatic disputes between the U.S. and Europe. Korea, rather than simply copying the EU system, should learn from the enforcement burdens and international frictions that have emerged during the DMA's implementation and seek an adjusted model that fits its own circumstances and trade environment. Without undermining the intent of the law, Korea could strengthen swift and effective ex-post sanctions when violations occur, or diversify the criteria for designation beyond revenue size to include market influence and user dependency, thereby reducing controversy over targeted regulation.

Second, regulatory parity between domestic and foreign companies must be clearly established both institutionally and in enforcement. Legal neutrality in wording alone is not sufficient; it is crucial to build trust that the same standards are applied in practice regardless of nationality. By imposing and actually enforcing equal consumer protection, data responsibility, and fair trade obligations on foreign platforms as on domestic companies, Korea must demonstrate the consistency of its regulations.

Third, digital legislation should be recognized not as a purely domestic regulatory matter but as a core trade issue, and a permanent cooperation channel between Korea and the United States should be activated. From the early stages of legislation, communication with U.S. trade authorities should be strengthened, and the purpose and scope of the system should be fully explained to preempt unnecessary misunderstandings. It is desirable to substantially operate public hearings and opinion-gathering procedures involving domestic and foreign companies and civil society to enhance the transparency of system design.

Fourth, the balance between freedom of expression and platform responsibility must be designed with greater sophistication. Responding to false or manipulated information is inevitable for democracy and consumer protection, but excessive monitoring obligations could lead to overreactions by platforms and private censorship. Rather than direct prior censorship of content, the focus should be on procedural obligations such as transparency reporting, accountability for algorithm operations, and the advancement of autonomous response systems. This approach is also in line with global human rights standards.

The legislative intent to establish fairness in the digital economy is legitimate. However, regulations that undermine trade trust with allied nations could, in the long run, limit Korea's economic options. It is a time when a restrained and strategic institutional design is required to uphold both the value of fair competition and the trust of the Korea-U.S. alliance.

Cho Wonkyung, Professor of Economics, Sejong University