Wednesday, May 27, 2020
New Trade Paradigm Needed
South Korea needs to change trade paradigm in order to respond effectively to the international trade environment which is changing rapidly.
New Trade Paradigm Needed
  • By matthew
  • December 29, 2011, 13:09
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Business Korea interviewed Han Jin-hyun, director general for trade at the Ministry of Knowledge Economy, about the meaning of surpassing one trillion dollars in trade volume and the challenges facing South Korea.

Fifty years ago, the Republic of Korea was seen as a nation too weak to remove the scar of the Korean War. This once small and weak nation has made a landmark achievement, exceeding one trillion dollars in trade volume, and has become the world’s ninth largest trading nation in just fifty years.

Director General Han said, “Korean genes helped us overcome crisis and enabled us to turn the economic crisis into an economic growth engine, and thus we have finally made this great accomplishment.” Han’s evaluation of the achievement clearly revealed his desire to share such an honor with all the people. However, it seems that he will soon turn his attention to even bigger goals. Han gave his opinion regarding South Korea’s trade history being characterized by challenges and responses, as well as the nation’s ups and downs, the meaning of trade achievement, and challenges that lie ahead.

Q : South Korea posted a record one trillion dollars this year for the first time. What were some of the major obstacles that had to be overcome in order to reach this remarkable achievement?

A: The landmark achievement of surpassing one trillion dollars in trade has been made possible in the history of the nation peppered with “challenges and responses.” South Korea established a foundation for industrialization in the 1960s in the wake of the Korean War, and aggressively fostered the heavy chemical industry in the 1970s. This served as the basic engine for this achievement. In the early 1980’s, with the help of the basic economic engine, South Korea was able to maintain momentum for economic growth by opening and expanding trade via obtaining membership in the World Trade Organization (WTO) and the Organization for Economic Cooperation and Development (OECD). The nation suffered economic hardships such as the Asian financial crisis 1998 and the global financial crisis in 2008. However, it overcame such crisis quickly and created a new opportunity for economic growth through the strategy of turning crisis into opportunity. For example, as part of this strategy, the nation reformed the entire industry and actively responded to changes in the international economic environment.

Q : What is the major contributor to this accomplishment? What are some of the challenges that South Korea must overcome in order to march towards bigger goals?

A: Fundamentally, the passion of our people and companies was the biggest momentum for this accomplishment. Amid ongoing global economic uncertainty, such as the fiscal crisis in Southern Europe and US economic recession, South Korea has made this landmark achievement. Considering this, the achievement is particularly meaningful. More specifically, I would like to praise the efforts of the shipbuilding, display, IT, and automotive industries, all of which are known as world leading industries. These industries have continued to improve the quality of their products and maintained a competitive edge in the global market. In regards to strategy, these industries did not fear the economic slowdown of advanced countries like the US and EU caused by the global economic uncertainty, and instead aggressively and successfully focused on emerging markets as part of a strategy to diversify overseas. However, the nation does of course have some challenges ahead, such as the need to nurture a new economic growth engine and improve the imbalance of exports.

Q : An increase in trade volume inevitably increases trade disputes. For example, South Korea came under anti-dumping investigations four times last year, showing a sharp increase in trade disputes. What measures are the government taking to minimize international trade disputes?

A: Antidumping, countervailing duties, and patent lawsuits are some examples of trade disputes. Foreign governments conducted antidumping and countervailing duty investigations into Korean companies fifteen times this year. Recently, lawsuits have been filed against Korean companies in emerging markets as well as in the Americas and EU. The total number of patent lawsuits filed in overseas markets was 33 during the first half of 2011, with 20 of these filed by companies from the Americas and EU. Patent disputes between Apple and Samsung regarding smartphone technology are an obvious example. The South Korean government plans to help companies deal with patent disputes by building networks with foreign governments and providing know-how. The government is actively responding to unfair trade investigations, including those regarding antidumping in foreign markets, by establishing public and private partnerships in order protect domestic companies from trade disputes. The government will also help domestic companies respond effectively to unfair trade investigations through its network with foreign governments. Above all, domestic companies should not become involved in trade disputes in foreign markets by effectively responding to changes in the international trade environment caused by the expansion of the Free Trade Agreement (FTA). In regards to this, the government plans to expand support to domestic companies in a way that helps them acquire expertise about antidumping and countervailing rules, each of which differ from country to country.

Q : The FTA between South Korea and the US that will take effect soon is also an important issue associated with foreign trade. Some experts are still warning against the optimistic outlook of the FTA. What is the meaning of the effectuation of the FTA, and what are some of the response strategies to the FTA?

A: The KORUS FTA will function as a bridge, helping South Korea dominate the US market, the world’s largest. Recently, fierce competition has been taking place there. When the FTA takes effect, national industrial production is expected to rise due to the intensifying competition between companies, the transfer of advanced technology to domestic companies, the introduction of transparent rules and regulations, and the advancement of the national economy. How we use the FTA is more important than the FTA agreement itself. The government needs to use the FTA as a tool to boost South Korea’s attractiveness to foreign investors. To this end, the government plans to intensify education regarding the FTA, provide more information about trade rules and regulations, boost overseas marketing assistance, and increase field assistance. In regards to increasing imports affecting domestic companies, the government plans to minimize any financial damage by helping them recover their competitiveness. The government aims to implement other response strategies to the FTA, including helping companies recover competitiveness through the Trade Adjustment Assistance (TAA), providing financial aid and counseling for restructuring, and improving rules and regulations.

Q : The dominant outlook for the global economy is that the economic recession caused by the Eurozone debt and financial crisis will be chronic. How do you expect South Korea to perform in overseas markets? What is the government’s policy to promote exports?

A: In 2012, combined import and export growth is expected to decline marginally from 2011 due to a delay in the global economic recovery and a slowdown in global trade. Accordingly, leading economic institutes forecast that import and export growth will stand at around 10% next year. South Korea should take advantage of the achievement of exceeding one trillion dollars in trade in order to remove internal disadvantages arising from international trade, as well as change its trade paradigm so that it matches the global trade environment. South Korea should diversify its export structure by fostering the export of parts manufactured by small and medium-sized companies, moving away from focusing on a limited number of priority exportable products manufactured by large businesses. The nation also needs to nurture the service industry, which is now lagging behind its competitors. The government plans to expand its export markets to emerging countries such as Latin America, the Middle East, and Africa beyond advanced countries, as well as establish a foundation to maximize exports through the KORUS FTA and Korea-EU FTA.