By Oh Young-jin
Business Editor
President-elect Barack Obama and his economic team should have a crash course on how protectionism adopted by the U.S. government after the 1929 Great Crash contributed to a prolonged depression that held the global economy hostage for the following decade.
The reason for this is because they are about to make the same mistake. It is unworthy of the Obama governance that, even before its inauguration, it is showing signs of veering from its platform of hope and change and moving toward fear and closure.
A case in point is the Obama camp's move to renegotiate a free trade agreement signed with Korea, especially regarding auto-related clauses.
Obama took issue with Korea-U.S. (KORUS) FTA during his campaign and after his election, with his aides being in a consensus that the deal was deeply flawed, putting U.S. automakers at a disadvantage. They apparently believe that Korea sells hundreds of thousands of cars in the U.S. market, while the sale of U.S.-made cars in Korea amounts to only a couple of thousand.
U.S. automakers ― GM, Ford and Chrysler ― employ a great number of people, being able to exercise enormous lobbying power on the government. They also form a traditional support block for the Democratic Party, on whose nomination Obama won his presidency. To help them tide over the current crisis, Obama vowed to provide a bailout package for the big three. In this sense, on the basis of a numerical difference between exports and imports, the Obama camp seems to be putting pressure on Korea for renegotiations of the KORUS FTA.
There are a couple of reasons, besides it being a protectionist step, why his effort to renegotiate the FTA, pending approval by the legislatures of the two countries before going into effect, will backfire.
First, GM, the troubled auto giant that is prodding Congress for handouts, has a thriving auto-making business in Korea in the form of a joint venture ― GM Daewoo, which is the third largest automaker after Hyundai Motor and Kia Motors.
Secondly, Hyundai and Kia also set up factories in the United States, producing a great number of cars in the U.S. market. This means jobs for thousands of American workers.
Unpleasant as it may sound, the quality of U.S. autos is a key reason why they are not selling well in Korea. They are big, gasoline guzzlers that break down more often than their counterparts. A look at the high sales recorded by Japanese automakers in Korea speaks volumes.
It may be tempting to bring action to a campaign pledge, snapping back tariffs on Korean cars or forcing Seoul to fulfill a quota for U.S. cars here but, all told, yielding to that temptation will likely make everybody a loser. Instead, it is time to force U.S. automakers to get their act together and improve the quality of their products to regain the confidence of consumers. As far as trade is concerned, free is fair. Besides, 80 years ago, our forbears left us with a lesson and it is time to put that word of wisdom to use.
foolsdie@koreatimes.co.kr
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