The purpose of this study is to examine the background behind the reinforcement of protectionist policies between Korea and the United States, and possible reasons for trade imbalance – the background behind trade conflicts, thereby seeking possible approaches through a comprehensive understanding of the problems found in the two countries’ conflicts.
Korea began its industrialization in the 60s and achieved persistent development through rapid industrialization, but was not able to overcome its chronic problem of imbalance. After continuous efforts and investment, it was able to achieve a surplus in the 80s and grow a surplus of $9.85 billion in 1987, achieving a surplus of $4.62 billion in 1986. However, as protectionism rose among developed countries, a series of problems occurred as a consequence, especially on trade relations with the US. The paper recommends that the US should consider its status on the international stage, and seek multilateral ways in coming up with a resolution.
Observing the factors of trade conflicts based on KORUS trade relations, most of Korea’s current account surplus comes from an excess of exports to the US. This is a crucial issue, as it is an issue of trade conflict recently being raised by the US. Considering the fact that the US among the developed countries is aggressively intervening in its local market and requiring the opening of the Korean market, conflicts with the US is a crucial issue that must be resolved, as the country is a gigantic export market and Korea highly depends on American exports and imports
Examining the background behind strengthened protectionist orientations from a general perspective, major developed countries have faced a series of difficulties including the two oil crises, thus showing protectionist tendencies under the purpose of developing their local industries. In particular, the US began to play a more active role in intervening in its local market. In terms of export with Korea, the US started to show protectionist tendencies towards Korea, Japan, and other Asian markets, keeping a wide range including the motor industry. In this situation, Korea brought 58 lawsuit cases related to conflicts with American export and import, but only 19 were recognized. As the current account turned into surplus, American demand in import regulations increased. Under this circumstance, America’s protectionism is likely to persist for the meantime, and may even intensify. The trade imbalance resulting from a persistent protectionist scheme can ultimately lead to conflict between the two countries, which can even lead to trade imbalance. This issue can also be observed from a theoretical perspective of trade balance.
The trade conflicts between Korea and US can be examined by observing the reasons and background from both countries, a multilateral and comprehensive perspective. America’s drastic decrease in its foreign transactions led to demands for surplus countries to open their markets. In particular, the issue can be analyzed as rising from America’s demand for a drastic increase on Japan and Asia. From the American perspective, another factor is America’s pressure on neighboring countries as they expanded around 1985, leading to a trade conflict. To examining reasons coming from Korea, the reason can be found in Korea’s rapid growth. Other reasons include the high growth of the Dollar (to 73.8%) between 1980 and 1985; trade conflicts due to America’s increased competitiveness and an unbalanced growth of the world market; export imbalance between South American countries and developed countries, and America’s non-intervention in the 80s; and America’s reinforcement of export on its local products. As the Korean economy’s foreign trade and export dependency began to increase as its economy rapidly grew since the 60s, it recorded a deficit of $5.32 billion in 1980, $8.9 billion in 1985. After 1985, conflicts began to occur as countries including Korea started protecting its local industries amid the rise in free trade. Furthermore, trade imbalances in Korea and other countries, unstable GDP and GNPs are also seen as reasons. The reasons and background behind KORUS trade conflicts can also be understood from a socio-cultural perspective aside from domestic and foreign market perspectives.
In order to assess the problems faced by the economy, there is a need to understand the necessity for a sustainable growth in order to develop as an advanced economy, and a harmonious management in the world market. Unstable factors in the domestic market must also be addressed, and domestic price must not be stimulated as much as possible. In particular, a fine line must be maintained in market opening and scale of import. However, there is a need to seek for more aggressive import approaches in items designated to be protected and those that are different from foreign regions. Considering the demonstration effect, this seems as a feasible approach in dealing with trade conflicts. In addition, a flexible adjustment of the local market and import products also seems viable. From the perspective of international economics, liberalizing the foreign currency and planning measures to deal with its resulting issues must also be done, as well as liberalizing foreign transactions in order to vitalize foreign trade. Other possible measures and policies that can be considered in resolving the trade conflicts between Korea and US include liberalizing the service sector; reinforcing the competitiveness of professional manpower, stabilizing the domestic market, giving autonomy in the market.
한&미 통상현안에 대한 이해(An analysis of KOR•US trade issues)
|Series Title; No||정책연구시리즈 / 89-01|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Trade|
|Holding||KDI; KDI School|