By Kim Tong-hyung
Staff Reporter
It is premature to predict but, based on what he has said, it is likely that U.S. President-elect Barack Obama will take a protectionist tone once he takes office next year.
Korean businesses are busy calculating possible pros and cons of the changeover in leadership of their biggest trading partner. Things are looking sunny for companies in IT, electronics and alternative energy sectors, while automakers, the steel industry and textile companies are expected to take a step back, according to experts.
``Obama wining the election could perhaps allow a quicker recovery from the financial crisis, but his protectionist approach and stronger policies to protect U.S. workers may result in a drop in exports for Korean companies,'' said Yoon Chang-hyun, a business professor at the University of Seoul, saying that the new U.S. government will prioritize cutting trade deficits.
This could have the U.S. government showing a quicker trigger for anti-dumping measures and countervailing tariffs, which could pose a threat to Korean industries, such as semiconductor, according to some industry watchers.
And with Obama consistent in his criticism of the free trade agreement (FTA) signed between the two countries in April last year (claiming an imbalance in auto trade), the possibility of a renegotiation is looming. The pact is now subject to approval by lawmakers from both countries, but the ratification has been delayed by political debate.
Lee Hye-min, Korea's deputy minister for the FTA, told reporters Tuesday that the government isn't yet considering renegotiation.
``Although it's debatable whether anti-dumping measures will be strengthened under the Obama administration, there is a possibility that disputes could be renewed in the semiconductor sector, although Korean electronics makers are well prepared for it,'' said Seo Do-won, a researcher from Hanwha Securities.
The Korea Trade-Investment and Promotion Agency (KOTRA) interviewed 60 businessmen and scholars from both Korea and the U.S. over the expected economic changes under the Obama administration.
The experts agreed that the new U.S. government is likely to take a protectionist turn (but not on the extent of the changes), and also to take stronger measures to combat currency manipulation in Asian economies.
Obama was a supporter of the ``Fair Currency Act'' bill submitted to the U.S. Congress last year, which reflected calls by American manufacturers to stop governments such as those of China, Taiwan and Korea from manipulating currency markets.
To create more domestic jobs, Obama could also move to reduce tax benefits to U.S. companies out-shoring their organizations, which could mean trouble for Korean efforts to host more investors.
However, there are also predictions that protectionist measures would diminish as the new government develops, considering the role of the U.S. as a world leader in free trade and the need for policy collaboration with the Republican Party.
Korean high-tech companies have high hopes for the Obama administration, whose Keynesian approach includes plans to build a nationwide high-speed Internet network, which may provide more opportunities for equipment makers.
Obama has also expressed keen interest in developing alternative and renewable energy industries, which has Korean companies in wind power and solar energy feeling optimistic.
The same can't be said for Korean industry heavyweights like Hyundai Motor and POSCO, who are now bracing for tougher circumstances. President-elect Obama has promised extensive support to U.S. automakers and also identified steel and textile as industries hurt by foreign competition.
``The recent financial crisis has raised the urgency of the U.S. government to protect its own industries and strengthen the competitiveness of U.S. workers,'' said Kim Jun-kyun, a KOTRA official.
``The main target of the protectionist measures is expected to be China, but Korea must be prepared for the changes as well,'' he said.