Financial Times | March 11 2009
Seoul seeks ‘concrete measures‘ on free trade
By Christian Oliver in Seoul
South Korea is pushing for the G20 countries to support a moratorium on new import tariffs at next month’s meeting, according to President Lee Myung-bak.
Mr Lee, writing in a document obtained on Wednesday by the Financial Times, said last year’s declaration in Washington featured a commitment to a standstill on new trade barriers. But he complained that countries from the world’s 20 leading economies had reneged on this pledge, using the global downturn as an excuse.
“The global recession is putting pressure on political leaders to resort to protectionist measures in trade as well as finance. This is in the interest of neither advanced nor emerging economies,” Mr Lee said in a publication on the G20 by the Munk Centre for International Studies at the University of Toronto.
“The G20 leaders should not only reaffirm their commitment to free trade but also come up with concrete measures to put their commitment into effect.”
A Korean officialconfirmed that Seoul wanted such “concrete” commitments included in the final declaration for the London meeting, which begins on April 2.
Korea’s export-dependent economy has been hit by plunging demand for its microchips, cars and consumer electronics. The government has stressed the importance of tariff-slicing trade agreements as a way of fighting back. However, its flagship deals with the US and the EU have run into stubborn opposition from carmakers there, who grumble that Korean companies such as Hyundai and Kia would gain an unfair advantage.
Barack Obama, the US president, and Ron Kirk, his nominee for trade representative, have attacked the terms of the deal with the US as unfair, leading to speculation that Washington could call for a formal renegotiation. Korea has said it will resist change to the accord, signed in 2007 but ratified by neither country. Seoul argues that the US will benefit from cutting tariffs on cars and farm produce.
Mr Obama has staked much of his reputation on securing trade deals, facing down massive street protests in South Korea last year over the import of US beef.
Asia’s fourth-biggest economy can be a hard market for outsiders to penetrate and many domestic companies are confident that locals will generally buy Korean. Seoul has also stressed that rice is sacrosanct and will not be opened up to unfettered trade.
Economists also point out the government has a greater role in Korea than in most developed economies and several sectors lack genuine competition. Even if the economy were exposed to more open global trade, many Korean workers would be able to fall back on government support through state-run enterprises.
In another attempt to revive the plummeting economy, a government official allied to Mr Lee said South Korea would seek parliamentary approval for another Won30,000bn ($20bn, €16bn, £15bn) supplementary budget on top of an original Won217,500bn. However, this will need approval from a fractious parliament where opposition lawmakers threaten to thwart all the ruling party’s plans.
The central bank will say on Thursday whether there is room for another cut in interest rates, already at a record low of 2 per cent.