ROK's options under Trumponomics
By Jeffrey I. Kim
On Jan. 20, 2017, Donald Trump became the 45th President of the United States of America. The message of his inaugural speech was simple and straightforward. His voice was strong and his determination to change America was firm.
During his election campaign, he had promised to make America strong and great again. His promises effectively stirred up a great number of American voters. Upon his presidential inauguration, he deplored, “For many decades we’ve enriched foreign countries at the expense of American industry, subsidized the armies of other countries while allowing for the very sad depletion of the American military,” and “We’ve defended other nations’ borders while refusing to defend our own”.
To make his promises come true, he will apply Trumponomics. During his campaign, Trump had promised to cut personal and corporate taxes, to restructure multi-lateral trade deals, and to undertake large-scale fiscal stimulus measures aimed at building nation-wide infra-structure and strengthening the military.
President Trump is now fulfilling his campaign pledges one by one. His rhetoric on trade and jobs during the campaign is turning into action. He has signed a series of major executive orders to change America. First he pulled the US out of the 12-nation Pacific trade deal, commonly known as TPP. Unlike his predecessors, Trump believes that the TPP is a disaster for American workers. In handling a trade deal, he wants to adopt a bilateral rather than multilateral negotiations framework.
Next he ordered the building of a great wall along the U.S.-Mexican border to deter illegal migration. He has high hopes this will create a huge number of new jobs in the U.S. He may have to finance the construction costs by putting higher tariffs on imports coming from Mexico.
From the perspective of American workers, Trumponomics may sound favorable but people in the rest of the world may be concerned about America’s one-way protectionist policy. Tariff retaliations may ensue.
Under these circumstances, I, as a Korean citizen, cannot help asking myself what policy options Korea may have. From the global perspective, we need to open up our markets further to improve business relations with our economic partners. At the same time, we need to strengthen our export competitiveness in world markets. From the perspective of the Korean national, however, there are some policy options we can choose. First of all, we can take a firm “give-and-take” policy with respect to the Trump administration. We need to develop our negotiating skills required in dealing with the U.S. not merely in trade and commerce but also in national security and technology transfers.
On the macroeconomic side, Trump has been bitterly criticizing quantitative easing and currency manipulations done by large economies. Henceforth, their currency value is expected to rise. So we can take full advantage of it. There is another area of policy options, which is foreign direct investment, both inward and outward. According to the World Bank, Korea is ranked as the fifth country in the world where foreign investors want to do business. Koreans should be able to explore the forthcoming opportunities when an economic crisis is looming.
Jeffrey Kim is a state-appointed ombudsman, a troubleshooter for foreign businesses here.