China seems to have substantial limits to making economic retaliations against South Korea for its decision earlier this month to allow the U.S. to deploy an advanced missile defense system on its soil, experts here note.
Last week’s measure by China’s Commerce Ministry to slap antidumping duties of 4.1 percent on acrylic fiber produced by a South Korean chemical company -- a 2 percent cut from its initial ruling in April -- has put Seoul’s trade officials somewhat at ease, though they still guard against any possible form of retaliatory move from Beijing. For the same product, Japanese and Turkish manufacturers were hit with higher duties of about 16 percent and 8.2 percent, respectively.
The announcement of the plan for stationing an advanced U.S. missile defense battery here has caused concerns that China may get South Korea to pay the economic price for taking a step that it sees as infringing on its strategic security interests.
This worry seems amplified by the memory of how Beijing reacted to Seoul’s measure in 2000 to increase its tariff on cheap Chinese garlic to protect South Korean farmers.
Though the measure was taken in accordance with the rules of the World Trade Organization, China retaliated by banning imports of mobile phones and polyethylene from South Korea. Seoul later nullified the tariff increase and agreed to import 32,000 tons of Chinese garlic.
South Korean officials engaged in the negotiation to settle the trade dispute still recall how unreasonable and unilateral their Chinese counterparts were.
But many experts here now see little possibility of China going for significant economic retaliation for South Korea’s recent military decision, noting such a move may also have negative consequences for its own economy and international reputation.
Kim In-ho, head of the Korea International Trade Association, echoed this view in an interview with a local daily last week by saying he believes “China has outgrown the stage of linking this kind of issue (the deployment of the missile defense system) to economic matters like in the past.”
He said there might be some fallout but South Korea didn’t need to become oversensitive to China’s response.
While expressing its strong displeasure with Seoul’s decision, the Chinese government has so far made no mention of possible retaliatory measures.
Shi Yinhong, a professor at Renmin University in Beijing, told a recent interview that China clearly recognizes that economic cooperation with South Korea is in the mutual interests of both sides.
South Korea relies on China for more than a quarter of its exports. This heavy dependence certainly leaves South Korean companies particularly vulnerable to trade restrictions by Beijing.
But such measures could boomerang to hit some Chinese manufacturers in the areas such as liquid-crystal displays and semiconductors, which depend on intermediary goods and equipment imported from South Korea, experts say.
China may also be concerned that retaliation against South Korea in disregard of international standards would result in hampering its efforts to be granted a market economy status by western economies at the end of this year as understood when it joined the WTO 15 years ago. Its unreasonableness could loom larger as South Korea is one of a few major economies with which China has concluded a free trade agreement.
Economists say what China wants least now may be further negative impact on its economy that is struggling with a slowing growth.
Beijing would also find its international reputation damaged, if it was to retaliate against Seoul’s move toward deterring nuclear and missile threats from North Korea, which it has been criticized for not having done enough to help resolve.
Some experts still see the possibility of China increasing pressure on South Korean companies in a less conspicuous way through nontariff tools.
According to data from the KITA, China has put into place 26 nontariff barriers to imports from South Korea -- the highest number among South Korea’s trading partners across the world.
Han Jae-jin, a researcher at the Hyundai Research Institute, noted China had various nontariff measures to limit imports of Korean consumer goods such as processed foods and cosmetics.
Beijing may also express its discontent by easing its stance against Pyongyang, which seems to have been toughened since the U.N. Security Council imposed stricter sanctions on North Korea in March. China allowed North Korean companies to join an exhibition of industrial goods held in the northeastern city of Dalian last week after blocking similar attempts by the North earlier this year.
By Kim Kyung-ho (khkim@heraldcorp.com)
