Korea's stake in US elections

By John Burton

The most important election that will affect Korea this year will not be the upcoming parliamentary polls on April 13. Instead, it will be the U.S. presidential and congressional elections in November.

The reason these elections are so crucial is they could signal a change in U.S. policy on global free trade, which has been one of the key supports for Korea's economic success. Almost all of the leading Republican and Democratic presidential candidates are now attacking free trade. That should worry Korea, which has one of the most trade-dependent economies in the world, with exports accounting for half of gross domestic product.

The fiercest critics have been Donald Trump, the Republican frontrunner, and Bernie Sanders, the Democratic insurgent candidate. Trump, in particular, has highlighted Korea in his attacks. He has complained that he has been forced to buy Korean TVs for his luxury resorts because America no longer makes TVs and he has linked this observation to the fact that the U.S. helps pay for Korea's military defense but "gets nothing in return."

Some may dismiss the sustained attacks on free trade as election year rhetoric and whoever is elected president will adopt a pragmatic stance. But even Hillary Clinton, still seen as the most likely person to be the next U.S. president, has jumped on the anti-free trade bandwagon, claiming she now opposes the Trans-Pacific Partnership (TPP) that she helped champion when she was U.S. Secretary of State.

The truth is that the anti-globalization mood in the U.S. may be here to stay for some time. Americans appear to have become convinced that free trade agreements have eliminated jobs in the U.S. while only benefiting big corporations. It is argued that while globalization has resulted in cheaper imports for U.S. consumers, it has also helped cause 40 years of wage stagnation.

While Trump and other candidates claim that Asian countries have been the main beneficiaries of free trade, they ignore the fact that many have their own economic problems. China is facing a very difficult transition from being an export-led economy to one dependent on domestic demand. Wage inflation and troubled state companies are just a few of the challenges that China must tackle.

In addition, China, Japan and Korea are facing a demographic time bomb in terms of aging populations that will reduce productivity rates, weaken consumer demand and impose higher welfare costs on governments.

U.S. criticism of the TPP is particularly short-sighted since the trade pact would impose new rules concerning intellectual property rights and government procurement on Asian trade partners that should benefit U.S. companies, while forcing the restructuring of protected industries in these countries.

Free trade deals are not the real cause for worker discontent in the U.S. It is rather technological developments, including factory automation and a growing digitized economy, which are destroying blue-collar and white-collar jobs. Technology advancements cannot be stopped and it is the U.S. that is the world's technology leader.

If the mood turns protectionist in the U.S., Korea is likely to suffer further blows to the economic growth. Slowing exports to China, Korea's biggest trade partner, are already likely to depress GDP growth this year to below 3 percent.

Korea appears to be unable to increase exports elsewhere to make up for falling shipments to China. The prospect of lower exports to U.S. would further expose the vulnerabilities of the Korean economy to changes in global demand.

As a result, Korea may be forced to double-down on its trade ties with China by strengthening the integration of regional supply links with Chinese businesses.

One way for Korea to combat the rising wave of protectionism in the U.S. is to remind Americans that total Korean investments in the U.S. have increased by 700 percent since 2001 and now exceeds $24 billion. These investments havecreated more than 32,000 jobs, including 8,000 by Hyundai's plant in Alabama and Kia's plant in Georgia. Other major Korean investors include Samsung, Doosan Heavy Industries, SK Corp. and LG Chem.

Korea should also show that it is more willing to play by trade rules promoted by the U.S. The Park Geun-hye's government initially resisted joining the 12-member TPP, which suggested that Seoul was uninterested in agreeing to 21st century global trading standards. The Korean government argued that TPP was not vital since Seoul had already concluded a bilateral free trade agreement with Washington in 2007. There has also been speculation that Korea was reluctant to join the TPP because it did not want to upset China, which is excluded from TPP and is opposed to the trade pact.

Korea should recognize that a more constructive attitude and active role in shaping new international trade standards would benefit its standing and improve future trade prospects. For the moment, Seoul appears to be a "rule taker" instead of a "rule maker" and that bodes ill in face of increased U.S. protectionism.

John Burton, a former Korea correspondent for the Financial Times, is now a Seoul-based independent journalist and media consultant. He can be reached at johnburtonft@yahoo.com.