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By Choi Sung-jin
Whoever becomes the next U.S president, he or she will likely exert a lot of negative influence on Korea's economy, a think tank believes.
"Both Hillary Clinton and Donald Trump are strengthening trade protectionism, as seen in their calls for reviewing the Korea-U.S. free trade agreement, darkening the nation's export outlook and job creation," says a Korea Economic Research Institute (KERI) report released on Sunday.
As changes in U.S. trade policy expected to be made after the presidential election, the report cites the imposition of antidumping and countervailing duties on Korean exports and the concession shutdown while the Korea-U.S. Free Trade Agreement (FTA) is being renegotiated.
If Washington steps up its trade pressure, it will have a considerable negative effect on Korea's industries in terms of trade and investment, the report says. The automobile sector will be hit worst, followed by information-communication technologies (ICT), home electronics, petrochemicals, steel, machinery, textiles and legal services.
If Clinton is elected, the U.S. administration is likely to expand its antidumping and countervailing duties on the Korean exports, the KERI report says.
As a result, Korea is expected to suffer an estimated $11.9-billion export loss between 2017 and 2021 as well as losing 92,000 jobs. Korean automakers are estimated to suffer the heaviest shipment loss of $4.6 billion, followed by ICT's $3.3 billion, machinery ($1.7 billion), steel ($1.1 billion), petrochemicals ($500 million), consumer appliances ($400 million) and textiles ($200 million).
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The expected job losses are biggest in automobile industry (41,000), too, then ICT (20,000), machinery (17,000), steel (6,000), textiles (2,800), consumer electronics (2,600) and petrochemicals (2,400).
The loss of production inducement and added value inducement are estimated at 29 trillion won ($26 billion) and 8 trillion won, respectively.
If Trump becomes U.S. president, the biggest policy change to be expected is the renegotiation of the Korea-U.S. FTA, says the report by the think tank affiliated with the Federation of Korean Industries, a lobby group for family-controlled conglomerates, or chaebol.
The Republican presidential candidate, blaming the various free trade accords the U.S. has signed with foreign partners for declining jobs in the U.S. and outsourcing by U.S. manufacturers, has called for across-the-board revisits of the FTAs.
If concession shutdown becomes reality during the possible renegotiation of the Korea-U.S. FTA, it will result in an export loss of $26.9 billion and a job loss of 240,000 from 2017 to 2021, according to the KERI report.
In this case, too, the automobile industry will be the biggest loser ($13.3 billion and 119,000 jobs). Machinery and ICT industries will likely suffer lost shipments totaling $4.7 billion and $3 billion, respectively.
Production inducement and added value inducement were estimated to fall by 68 trillion won and 18 trillion won.
"Korea and the United States agreed to put an end to their bilateral FTA within six months of either side unilaterally sending a written notice of terminating the accord," says Professor Choe Nam-seok of Chonbuk National University who conducted the research at KERI's request. "If and when the Korea-U.S. FTA enters into renegotiation, the U.S. will likely suspend all concessionary measures or the application of the trade accord."
He stresses that to minimize damage to some hard-hit sectors, including automobile, ICT and machinery, the Korean government needs to work out countermeasures for each industry.
"To this end, government officials should first find out which U.S. industries have made extensive lobbies on the two candidates," Professor Choe says.
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