It was a subdued celebration of the Trade Day on Dec. 5. For the first time since 1957-1958, the nation is expected to register a decline in exports for two consecutive years. After an 8 percent decrease last year, we will see a 5.6 percent decline with total exports reaching $500 billion by the year’s end. Last month there were small signs of recovery, but whether this ember in the ashes is a signal of a sustainable recovery is anyone’s guess.
At this juncture, the last thing South Korea would expect from its largest trading partner is trade restrictions of various sorts. But the situation for Korean exporters is not that friendly in China. Fears are spreading now that retaliatory actions against Korean products and services are being taken since Korea decided to deploy a Terminal High Altitude Area Defense system here. Of course, there is no hard evidence, just speculation.
Complaints from Korean exporters include an extended amount of time for customs clearance at ports and an “enhanced” scrutiny of imports by the Chinese authorities. More-than-usual safety and sanitary inspections of Korean products and facilities inside China are also being reported. Korean entertainment events are being delayed or canceled for different reasons. What is clear at least is that a more rigorous application of regulations is taking place at the border and beyond.
A fundamental difficulty with rigorous enforcement of the law lies in the almost impossible task of proving the underlying intent. When authorities counter that they are only applying the law as written down, the conversation usually stops there. There are many ways that a governmental agency can give business entities a hard time entirely within the bounds of law. Perhaps that is why CEOs of Korean corporations succumbed to the demand from the higher echelon in the recent scandal.
This reality applies to international trade. At the border and in the home market, an importing state has many options available to give a hard time to foreign exporters and their products. Provisions are contained in trade agreements and investment agreements, but often times there are issues that are not directly regulated by those provisions and unfortunately left for the discretion of the authorities. When such discretion is exercised, it is quite difficult, if not entirely impossible, to pinpoint any particular violation.
To make the situation more complicated, certain regulatory measures take the form of a legitimate law enforcement activity to conduct criminal investigation and consumer protection. Take tax evasion investigations and product safety inspections for example. They are done by any government on a regular or an ad hoc basis upon receipt of relevant information. So, the mere fact that investigations and inspections are pushed forward, in and of itself, does not necessarily mean that it somehow constitutes a violation of these treaties.
Coming back to the difficulties Korean exporters are facing in the Chinese market at the moment, it is still too early to tell whether these irregularities somehow implicate promises and covenants made in these treaties. Complaints from the field are mainly pieces of anecdotal experience and have not been filtered for a more meaningful discussion.
We tend to believe that difficulties in a foreign market directly amount to a violation of trade agreements with that foreign country. They do sometimes. But that is not necessarily the case. Anecdotal evidence should be accumulated to see if a pattern is found to show bad faith. Until then, a mere rigorous enforcement of the law falls short of pinpointing violations of particular elements of trade agreements.
Hopefully recent difficulties for Korean exporters in China are mere individual aberrations, and the benefit of the Korea-China FTA is enjoyed by all Korean and Chinese traders. The first anniversary of the agreement is next week.
By Lee Jae-min
Lee Jae-min is a professor of law at Seoul National University. He can be reached at jaemin@snu.ac.kr. — Ed.
koreaherald@heraldcorp.com
