Trade protectionism has been spreading around the world because of the global economy’s protracted slump, which is most unwelcome news for the export-dependen…
By Choi Sung-jin
Government and business officials are racking their brains to deal with the changing trade environment but what they can do appears limited, at least for now.
Spearheading the revival of protectionism are the two biggest, until recently that is, advocates of free trade — the United States and the European Union. On Monday, the U.S. Commerce Department decided to slap 57.04 percent anti-dumping duties on hot-rolled steel sheets imported from Korea.
As of July 30, 31 countries were restricting Korean imports in 179 cases — import regulations in one way or another were already in motion in 132 cases and investigations were under way in the other 47.
By type of regulation, antidumping duties accounted for 70 percent of the total. By country, India was the most active regulator of Korean imports with 32 cases, followed by the U.S. (23) and China and Brazil (11 each). By item, steel and metal products were the most frequent targets with 87 cases, chased by chemical goods (48).
According to a report released by the Federation of Korean Industries (FKI) on Wednesday, 10 out of 15 industrial associations said they were “experiencing trade protectionism, directly or indirectly.”
The industry groups cited three major types of protectionism — antidumping tariffs and other import restraints by the U.S. and EU, setting up of nontariff barriers by China, and intentional import controls by developing countries to protect their domestic industries.
More seriously, most domestic industrialists expect the trend will deepen, not ease.
In the United States, the two major presidential candidates are vowing to repeal or renegotiate free trade agreements and designate trade partners as currency manipulators. Experts here are concerned that Washington could increase the number of protective trade management items. With respect to the recent steps on Korea’s steel imports, in particular, they stressed the need to watch the U.S. Commerce Department’s ruling on countervailing duty.
“Few know where and how the wind of protectionism will blow, and so we should step up monitoring,” said Chung Hee-chul, manager of the trade cooperation department at the Korea International Trade Association (KITA).
In the U.S., officials seem to regard the Korean government’s power supply to industrial consumers at low prices as a privilege that helps reduce their production costs and enhances their products’ price competitiveness, industry sources said.
As most large businesses have benefitted from low electricity prices, they can become targets of regulation, the sources said.
Rep. Park Ju-min of the opposition Minjoo Party of Korea said, based on data he received from Korea Electric Power Corp., the state utility recorded losses of 724 billion won by supplying electricity to 20 large enterprises, including Samsung Electronics, POSCO, Hyundai Steel, Samsung Display and SK hynix, at below production costs.
“If Rep. Park’s allegations are right, foreign countries can levy countervailing duties on Korean products for reason of discounts in power rates,” said Park Myung-deok, a fellow at the Korea Energy Economics Institute. “We cannot rule out the possibility the import regulations spread from steel to smartphones and semiconductors.”
Some trade experts say the government has taken a hands-off approach on trade frictions for too long. “The foreign ministry has said the Korea-U.S. relationship was best in history but the reality was somewhat different,” said an expert wanting to remain anonymous, commenting on the U.S. atmosphere against the bilateral free trade accord. “Officials here seemed to think it was just a transient protectionist whiff in the run-up to elections.”
Most experts acknowledged it is realistically difficult for Seoul to intervene in other governments’ steps on Korean companies but trade officials should have tried harder to explain the nation’s industrial and trade policies to their foreign counterparts.
An official at the Ministry of Trade, Industry and Energy said the ministry would continue to monitor the situation closely and try to communicate better with foreign governments.
Later in day, the ministry invited the representatives of major industries and decided to activate a government-civilian committee to cope with import regulations abroad.
The participants also agreed to set up an advisory group, composed of trade lawyers and other experts, under the initiative of KITA, and activate task forces in major trading partners, including the U.S., India and China, to collect information and conduct bargaining if necessary.
“As a country that lives on exports, the resurgence of protectionism poses a serious threat to Korea,” said Eom Chi-sung, chief of the FKI’s International Department. “Trade frictions require a lot of time and money to resolve, and therefore it is best to keep them from occurring.”