By Yoon Ja-young
Staff Reporter
Governments around the world are strengthening protectionism to boost their own economies ― a big blow to exporting nations such as Korea ― and the petrochemical and steel industries are likely to be hit hardest by the moves, according to a report Wednesday.
``A steep rise of tariffs such as the ones seen during the Great Depression isn't likely. However, indirect protectionist measures such as supporting local business on the pretext of boosting the domestic economy or setting up non-tariff barriers with regard to the environment or technology could be bolstered,'' said Jung Ho-sung, a research fellow at the Samsung Economic Research Institute (SERI).
There has been growing concern that Korea, which depends heavily on trade, could be seriously damaged by the protectionism. Trade makes up between 70 to 80 percent of the country's gross domestic product (GDP).
Economists have been pointing out that the overall effect of protectionist measures on the economy will be negative as such moves would prompt others to follow suit.
According to research by Gary Hufbauer and Jeffrey Schott, for example, around 1,000 jobs will be created in the U.S. steel industry to meet domestic demand for economic stimulus projects. However, as other countries close 1 percent of their markets to U.S. exporters in retaliation, around 6,500 jobs in the U.S. would disappear.
Jung estimated that Brazil, Russia, India, the European Union (EU) and China will bolster protectionism measures stronger than others. ``Brazil, Russia and India, which tend to pursue protectionism, are likely to raise the barriers further, facing intensifying protectionism from developed countries.''
He added that a growing unemployment rate would pressure the EU to further consider protectionist practices.
China could also bolster regulations on imports due to the high portion of manufacturing in the economy. The manufacturing sector hires 28.5 percent of workers in China.
Among the various industries, Jung said petrochemical and steel industries would face the most severe protectionism. ``In petrochemical industries, oversupply by emerging countries such as China has become a serious problem, following massive facility investment,'' he explained.
He added that industries hiring many workers, or that suit the country's strategic interest, are likely to benefit from heavier protectionism.
Jung said Korea should lead anti-protectionist moves as a co-chair of the G20.