REPORTER’S NOTEBOOKKorea’s ‘self-applauding’ corporate policy catches flak

Deputy Prime Minister and Finance Minister Koo Yun-cheol, left, answers questions from lawmakers about the latest tariff agreement between Korea and the United States at the National Assembly in Seoul, Wednesday. Yonhap

Anti-corporate government policies are adding to the pressure on major export-reliant companies at home, making it harder for them to seek timely relief from the strain of U.S. tariffs.

Since the inauguration of the pro-labor administration led by President Lee Jae Myung in June, the nation’s corporate management environment has become more complicated. As expected, the administration is moving to pass a series of restrictive bills spanning broad areas of business, including taxation and labor relations.

This contradicts the government’s outward pledge to support corporate growth. The government has issued messages almost every day promising to provide policy support for their survival and sustainable growth.

“Companies stand at the center of Korea’s economic growth,” Deputy Prime Minister and Finance Minister Koo Yun-cheol said Tuesday during a meeting with heads of major business lobbies. “The government and private sectors will join forces to find specific measures to enhance their global competitiveness.”

In reality, however, actions tell a different story. Last week, the government and the ruling Democratic Party of Korea agreed to raise the maximum corporate tax rate to 25 percent from 24 percent.

Many critics and local business lobbies have criticized the corporate tax reform, arguing that it runs counter to global standards. They claim that most developed economies are moving toward lowering corporate tax rates for domestic firms so they can gain more competitiveness on the global stage amid growing protectionism.

“Big companies will still have the fundamentals to survive under the double whammy of U.S. tariffs and the corporate tax hike, but this is not the case for small and medium-sized firms, which are highly vulnerable to external risk factors,” an official from the local business circle said.

Earlier, the U.S. agreed to reduce its auto tariff on Korean vehicle imports to 15 percent from 25 percent. The Korean trade delegation was engaged in rounds of negotiations with their U.S. counterparts for months to achieve more favorable outcomes.

After both countries made the deal last week, the ruling party and the government have spoken highly of the latest outcome, saying that they “protected the national interest” with “practical diplomacy.”

However, many experts and industry officials responded negatively to the trade agreement, as the country failed to reduce the figure down to 12.5 percent. Korean and Japanese carmakers can compete on an equal footing in the U.S. auto industry only when Korea's auto tariff is set at 12.5 percent.

They said the government should have made greater efforts to reduce the tariff rate to that level, as Japan already faced a 2.5 percent auto tariff when exporting their cars to the U.S., while Korea was exempt from the tariff under the Korea-U.S. Free Trade Agreement.

Amid growing criticism, Koo issued an apology regarding the auto tariff Wednesday.

“The government is not congratulating itself on this outcome,” Koo told lawmakers during a National Assembly general meeting.

“We made strong demands (for an auto tariff reduction to 12.5 percent) to U.S. President Donald Trump, but it was not accepted. We apologize for it.”