Korean Exporters Wary Over Obama
By Kim Jae-kyoung
Staff Reporter
Many Korean policymakers and business leaders might have bittersweet feelings over President-elect Barak Obama's victory in the U.S. presidential election Wednesday, thinking that while he may bring opportunity he could also imperil Asia's fourth largest economy.
On the bright side, he will shift policy from the Bush administration's isolationism to international cooperation through dialogue, which many believe will reduce geopolitical and economic risks on the Korean Peninsula in the long-term.
On the other hand, he will seek ways to protect U.S. businesses and workers, which may trigger trade conflict with Korea ― Obama pledged to restrict free trade agreements (FTA) during his campaign.
Known as a protectionist, the President-elect has criticized the Korea-U.S. FTA. In a letter sent to U.S. President George W. Bush in June, calling the FTA ``badly flawed,'' he urged Bush not to submit the FTA for ratification by Congress.
Although many express concerns about Obama's protectionism, global economists suggest that his administration will eventually create more good for the Korean economy than harm, even though there will be some negatives over the short-term.
They added that although there will be greater pressure for FTA renegotiation, it will not jeopardize the alliance and Obama will support the passage of the deal in the end.
``The American Chamber of Commerce (AMCHAM) in Korea is confident that Obama understands the importance of the U.S.-Korea relationship and that he will further build upon the strong economic, political and security elements of our relationship,'' AMCHAM Korea CEO Tami Overby told The Korea Times.
``I believe that with his leadership and willingness to reach out to the international community, his plans for the U.S. economy will also help resolve the economic difficulties that we are facing in Korea today,'' she said. ``If the U.S economy regains its confidence, I think the Korean economy will also benefit from this.''
Overby called for Seoul to ratify the FTA first to see some movement in the near future, saying, ``If the Lee Myung-bak administration ratifies the FTA in the National Assembly first, it will naturally place pressure on Obama to urge the Congress to do the same.''
Growing fears of a recession are also expected to cause the FTA to lose focus and force Obama to stimulate the global economy through international cooperation.
The most urgent task for him is to prevent the U.S. economy from slipping into a deep recession by saving consumers saddled with heavy debts through aggressive pump-priming measures, such as expansionary fiscal spending.
Mauro F. Guillen, director of the Lauder Institute at the Wharton School of Business, said the impact of the Obama administration on Korea could potentially be two-fold.
``If Obama moves swiftly to implement a fiscal stimulus through infrastructure spending, then the U.S. economy could rebound rather quickly and help exporters like South Korea rebound as well,'' he said.
He pointed out that Democrats are in control of both Houses, which means that they have more of a free hand to fix problems with the financial system and the economy.
``The other potential consequence is the relationship with North Korea. Obama is likely to be much more inclined to use diplomacy and to build a coalition to deal with North Korea,'' he added. ``I think who gets appointed as Secretary of State will be crucial.''
Stijn Van Nieuwerburgh, a finance professor from the Stern School of Business at New York University, echoed the view, saying, ``This victory signals the beginning of a new era of international cooperation instead of isolationism.
``I expect all countries, including Korea, to benefit from this enhanced dialogue. Clearly, the task to fix the economy is momentous. The faster the economy in the U.S. turns around, the faster the world can resume its quest for greater prosperity.''
Obama is also expected to cement international cooperation to minimize the global economic slowdown, which will help the U.S. restore its leading role in the global economy and financial markets.
``The election of Obama gives the U.S. a fresh chance to renew its global leadership, with a more co-operative spirit,'' Goldman Sachs chief global economist Jim O'Neill said.
``It will be really important to watch early steps that his administration might make on reforming the world financial architecture, and bringing in the so-called BRICs (Brazil, Russia, India and China) economies to a more central role in the G7 and IMF,'' he added.