Published : Nov. 9, 2016 - 20:30
The election of Donald Trump as the next US president has plunged South Korea’s trade policymakers and exporters deep into concerns that his protectionist threats may come to reality.
With job losses in the Rustbelt states making trade a key issue in the latest US presidential election, Trump has risen to prominence by promising to impose steep tariffs on imports from China and Mexico and to scrap or renegotiate free trade accords concluded under previous administrations.
In particular, he has repeatedly denounced the free trade agreement with South Korea, which went into force in March 2012, as a “disaster” that destroyed 100,000 jobs in US manufacturing.
His election victory is heightening worries that the foundation of bilateral commerce between the two allies will be rattled if Trump seeks to renegotiate the deal as he has suggested.
As the US International Trade Commission indicated in a report released in June, the Korea-US free trade pact has served the interests of both sides. According to the report, the deal is estimated to have improved bilateral merchandise trade balances by $15.8 billion last year.
The US remains displeased due to the fact it has accumulated the largest trade deficit with South Korea among countries with which it has concluded a bilateral trade accord.
According to data from the Korea International Trade Association, the country’s trade surplus with the US soared from $11.6 billion in 2011 to $25.8 billion last year. The corresponding figure amounted to $17.9 billion in the first nine months of this year.
South Korea has seen exports, which account for about half of its gross domestic product, shrink in 21 months out of the last 22 months through October. The country still marked the 58th consecutive month of trade surplus last month.
For the 12 months ending June this year, the ratio of South Korea’s current account surplus to GDP came in at 7.9 percent, up from 7 percent a year earlier, according to a report released by the US Treasury Department in October.
“Aggressive trade policy to be pursued during Trump’s presidency will have a severe impact on Korea’s major exporting companies,” said Yoon Woo-jin, a researcher at the Korea Institute for Industrial Economics and Trade.
He saw that the incoming US administration would strengthen measures to protect local manufacturing industries and call for South Korea to open its service markets at a faster pace if the bilateral trade accord would not immediately be subjected to renegotiation.
In an apparent reflection of the rising protectionist rhetoric in the presidential race, US authorities have this year imposed more restrictive measures on imports.
South Korean steelmakers have almost given up on US markets after being charged with a string of antidumping and countervailing duties on a wide range of their products.
Experts see that US requests to be made during possible renegotiation on the trade deal with South Korea would range from the complete opening of rice, beef and legal services markets, the lifting of regulations on electronic commerce and customs procedures and the improvement of practices regarding government subsidies.
“Caution should be taken to set up and abide by objective standards for the ongoing restructuring of debt-laden companies to avoid money put into the work being regarded as improper government subsidies,” said Kwak Ro-sung, a professor of international economics at Dongguk University in Seoul.
It may be difficult to cope with additional demands from the US, which would affect interests of various sectors in the country.
Deputy Trade Minister Kim Hak-do said coordinating internal interests might hold the key to successfully getting through a tougher environment surrounding trade and investment ties with the US.
While bracing for a surge in protectionist pressures from the US, some officials here seem to pin hope on the possibility that Trump will not carry out all of his campaign pledges after taking office.
“If he takes office, the Republican candidate will face realities that he cannot be aware of now,” Finance Minister Yoo Il-ho said in an interview with a foreign news outlet last month.
Many experts note Trump’s extreme protectionist measures would provoke trade wars with China and other major trading partners, which might push the world’s largest economy back into recession. US consumers on low pay spend a far greater proportion of their income on imported goods than the affluent.
Moon Jong-chol, a KIET analyst, said Trump’s practical sense as a businessman might guide him in dealing with trade issues as president.
If not so, he noted, Trump would not be entirely free to push through his will in the US governing system balanced between the administration and the legislature.
Experts say what is seen as a rare bright spot for South Korean companies is that they may gain more business opportunities in the US if Trump is to implement his campaign pledges to increase investment in renovating outdated infrastructure facilities.
By Kim Kyung-ho (khkim@heraldcorp.com)