In a meeting of government officials and corporate executives convened last week to discuss how to boost exports, Trade Minister Joo Hyung-hwan called for strengthened efforts to put an end to a record streak of on-year monthly declines in Korea’s outbound shipments since the start of last year.
He saw August as a crucial period to test whether the country could make a turnaround in exports, noting the pace of decrease has been decelerating in recent months.
As adverse factors that might leave the goal still out of reach, the minister cited a slowdown in emerging markets, lower demand from China and the fallout from the U.K. vote in June to leave the European Union.
But his remarks fell short of addressing what Korea Inc. might now be most concerned about: a rising flow of trade protectionism across the globe.
A report released by the World Trade Organization in June showed that in the seven months leading up to mid-May in 2016, G20 economies introduced 145 protectionist measures, the most since 2009.
What is notable in the latest wave of protectionism is that unlike in the past, advanced economies, not developing countries, are ramping up such measures as they grapple with increasing unemployment and income inequality.
According to the Global Trade Alert launched by the Center for Economic Policy Research, a London-based European network of economists, the U.S. took 90 protectionist measures last year, the most in the world. This trend is set to further increase in the U.S. in the coming years, as both of the two main candidates for the presidential election in November — Republican Donald Trump and Democrat Hillary Clinton — have vowed to protect the American working class from what are widely seen as unfair trade deals.
Korea, a relatively small, open economy, is positioned to suffer greatly from the mounting protectionism. The upsurge in protectionism across the globe may wash over its efforts to expand its “economic territory,” having concluded free trade accords with 52 countries so far, experts say.
As of the end of June, the number of import restrictions imposed on Korean products abroad stood at 184, up from 159 a year earlier, according to figures from the Ministry of Trade, Industry and Energy.
India put in place 30 restrictive measures against imports from Korea, followed by the U.S. with 22 and China at 11.
Korean exporters worry they may face more restrictions from the U.S. and China if Washington moves to renegotiate a trade deal with Seoul and Beijing attempts to retaliate Seoul’s decision to introduce an advanced U.S. missile defense system by heightening nontariff barriers to Korean goods.
“The government should work out strategies to cope with the rapidly changing global trade environment and reinforce the trade negotiating staff,” said Chung In-gyo, a professor of economics at Inha University.
Seoul officials have recently suggested Korea will take an active role in advocating the benefits of free trade and cautioning against protectionist moves on multilateral stages such as G20 meetings and the WTO.
During her speech at the Asia-Europe Meeting summit in Mongolian capital Ulaanbaatar last month, President Park Geun-hye urged member states to join forces to promote open and free trade. In a move to give impetus to this effort, Park proposed resuming the long-suspended talks of economic ministers from the two continents in Korea next year.
Experts say it cannot be an option for Korea, which heavily depends on trade for its economic growth and prosperity, to join the protectionist trend.
“(Korea) should be careful not to become an easy target for retaliation by more powerful economies by making the mistake of conforming to the neoprotectionism,” said Choi Won-mok, a law professor at Ewha Womans University, in a recent contribution to a local daily.
He suggested the country should rather focus on precluding retaliatory measures by major trading partners, keeping its industrial policies in accordance with international rules and standards.
At last week’s meeting presided over by Trade Minister Joo, a set of measures, including increasing the coverage of trade insurance to exporters to high-risk emerging markets, were unveiled to support efforts to reverse the continuous decline in exports.
Experts say caution needs to be taken not to allow this active push for boosting exports to cause other countries to become more alerted. Despite a fall in exports since January last year, Korea has extended the streak of current account surplus to 54 months.
At the same time, the country should augment its negotiating arm to carry forward negotiations on concluding new trade deals and cope with calls for renegotiating existing accords in the years ahead, they say.