Looming Trade War

Watch out for Development and Work out Countermeasures

``The nation has decided to redouble its exports and create 2 million jobs in five years ... and the President himself will check proceedings periodically by activating an `export promotion cabinet.'''

This is not a press release from Seoul back in the ``export-drive'' era of the 1970s and 80s. The news came from Washington just last week. If the audience feels that 21st-centry America is following the footsteps of 20th-century Korea, they may not be entirely wrong.

There is one big difference, though: The United States will increase pressure on trading partners to open their markets wider, something a meager Korea couldn't dream of doing ― then or now.

Foreigners may hardly be able to take issue with the ``New Export Initiative'' of the Barack Obama administration if it is aimed at rectifying the ``global imbalance'' that gripped the first decade of this century, during which Americans lived beyond their means, as emerging economies bought up the U.S. debt with their hard-won export earnings.

Before Washington declares the comeback of America as a global export powerhouse, however, U.S. policymakers need to ponder what has caused the global imbalance in the first place: Was it because foreign markets were closed or made-in-USA products were less competitive ― with price tags relatively high for their quality? Or, has America simply ignored manufacturing while indulging in the money game?

A case in point is the auto industry, ostensibly the single biggest reason the U.S. Congress refuses to ratify the Korea-U.S. free trade agreement, or KORUS FTA. U.S. politicians and industrialists have long told their people Korea's car market is one of the most closed to foreign vehicles. Maybe true, maybe not. But the same officials seem to have failed to add the fact that over the past decade or so, the European and Japanese cars have nearly tripled their market shares here, while the comparable gains for U.S. vehicles stopped at around 70 percent.

Korea's trade surplus of $8 billion with the U.S. is peanuts compared with Japan's $80 billion, let alone China's $300 billion. If the proceeds from U.S. firms' direct investment here are included, the two countries can be said as maintaining an overall trade balance.

And this explains why Seoul needs to more squarely deal with the possible trade pressure from Washington. In part because of the U.S. officials' tenacity in their auto-related demands and because of Korean officials' clumsy response to it ― including President Lee Myung-bak's commitment to renegotiate the auto deal, many Koreans, even politicians, seem to think the bilateral trade strongly favors Korea.

Nothing could be further from the truth. Any gains in the automobile sector were made at the expense of the domestic agricultural, pharmaceutical and services industries, as shown by the controversial beef imports demanded by Washington as a precondition for the bargaining.

Koreans still remember the notorious wielding of a sledgehammer by an opposition lawmaker to block the parliamentary railroading of the KORUS FTA bill in 2008. The method was wrong but the end result was right, as the nation otherwise could have become the laughing stock of the world, considering it is not certain whether the U.S. Congress will legislate it before America's mid-term elections in November.

Still some Korean bureaucrats and politicians have begun to press ― again ― for its passage here, which they say is the only means of avoiding renewed trade pressure. These officials with short memories and poor calculation could learn at least one thing from their U.S. counterparts: to work always for their own workers and voters.