Baek Byung-yeul is a journalist at The Korea Times focused on cultural content, including films and cultural events in South Korea. You can contact him at baekby@koreatimes.co.kr to share your insights.
Economic security tops Yoon's trade policy
President Yoon Suk-yeol speaks during the Seoul Forum for International Affairs at a hotel in Seoul on April 18. Joint press corps
By Baek Byung-yeul
New gov't likely to join CPTPP, IPEF
By Baek Byung-yeul
The Yoon Suk-yeol administration, which kicked off its five-year term on May 10, is expected to face a range of daunting trade issues over the next five years as the nation tries to maintain its balance between the United States and China at a time when the two economic powers are competing for geopolitical influence around the world, according to trade experts on Monday.
They said the new government's top priority should focus on securing economic security to help strengthen the competitiveness of Korea's top export items such as semiconductors, electric car batteries and other emerging technologies. Expanding cooperation with the international community such as joining mega-trade pacts is also required to increase the trade territory of Korea, the experts said, stressing the establishment of economic and diplomatic network channels with future markets such as Southeast Asian countries in order to replace China ― where labor costs are rising.
“Trade is very important to our country. This is because Korea is highly dependent on the outside world and is very good at making products such as semiconductors that are sold a lot abroad,” Lee In-ho, economics professor at Seoul National University, said.
“It was not the right direction to grow materials, parts and equipment sectors to counter Japan's trade sanctions implemented by the previous government. It's necessary to grow these industries to some extent, but under the new government, we have to focus more on what we are doing well.”
The economic environment, especially in regards to trade, which the new administration will face is expected to be a thorny path due to issues at home and abroad.
Korea's exports in April rose 12.6 percent year-on-year thanks to strong demand for semiconductors and petroleum products, but the country's trade deficit continued to widen due to soaring energy prices.
With the war between Russia and Ukraine as well as China's lockdowns on major cities expanding, the economic situation surrounding Korea seems difficult to improve, in the short term. As major countries are increasing their interest rates, there are even concerns about a global economic recession in the second half of this year.
Considering these points, the professor said it is important for the government to create an environment in which companies are able to make innovative products. He also emphasized that the country needs to actively join mega-trade pacts.
“There is nothing to lose from participating in multilateral trade pacts and we have much more to gain. Basically, for countries that are not large in size and are highly dependent on trade, it is advantageous to participate in these pacts except for few industries such as agriculture,” Lee said.
Currently, Korea plans to join a mega free trade deal called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which involves 11 nations such as Singapore, Australia, New Zealand, Japan, Canada, Mexico and Vietnam.
The country is also mulling whether to join the U.S.-led Indo-Pacific Economic Framework (IPEF). Amid an intensifying U.S.-China rivalry, the U.S. government has tried to launch the economic framework for more cooperation with partner nations in Asia.
“The IPEF was conceived and announced by U.S. President Joe Biden in October 2021 and will discuss regional cooperation in the fields of digital, supply chain and infrastructure,” Choo Kyung-ho, a finance minister nominee, said on May 1.
“I think it is the right policy direction for the new government to join the IPEF and maintain close relations with the U.S., Kim Dae-jong, a professor of business administration at Sejong University, said. “As trade with China expanded, China, including Hong Kong, accounted for 33 percent of Korea's entire trade as of the end of 2021. But securing security is more important for the country and the economic issue comes next.”
“Korea depends on the U.S. for security and China for its economy, so it is important to have a good balance between the two superpowers. However, the new government will have to implement policies to strengthen security, as the first priority is to protect the nation,” the professor added.