eel products is attributable to rising trade protectionism and an excess supply of steel as a result of China’s overinvestment in steel production facilities. Let’s hear again from Professor Choi.
Steel comprises the key element of major industries. South Korea developed the steel industry even in the 1960s when the nation was badly off. Korea could have imported steel from other countries, but it decided to foster the steel industry, a basic industry that would be necessary for all economic activities from a long-term perspective. As I said, many countries have tried to protect their own steel industries to address the employment issue since the 2008 global financial crisis. Since the inauguration of U.S. President Donald Trump and Brexit, in particular, trade protectionism has become common around the world.
Trade protectionism, which started in the U.S. after Trump took office, has spread around the world, giving rise to more import restrictions on South Korean steel products. The Middle East, which had not imposed restrictions on imported steel from Korea, began to take safeguard actions this month, while the EU is considering a similar action. Last year, South Korea exported steel products worth three-point-six-one billion US dollars to the EU, which is Korea’s fourth-largest steel export market, following China, the U.S. and Japan. It is easy to imagine that restrictive measures by the EU will add to the Korean steel industry’s difficulty. Worse yet, trade protectionism that started in the steel sector may spread to other industries. Professor Choi continues.
The automobile industry could be hit by protectionist trade. Trump has said that U.S. cars sold in Europe and China are subject to duties of ten percent and 25 percent, respectively, while the U.S. imposes just two-point-five percent of import tariffs. Pointing out the imbalance, he suggested that other countries lower their import tariffs or the U.S. raise its import duties. South Korean semiconductors might also see a similar situation. As steel is the key element of major industries, semiconductors are the key element of futuristic, high-tech industries. South Korea and the U.S. are the major producers of semiconductors. Considering that the U.S. is wary of China’s expansion to the semiconductor business, Washington’s trade protectionism can be applied to this field. This will have a big impact on Korea.
In May, South Korea’s combined overseas sales of steel products, automobiles and semiconductors amounted to 17-point-three billion US dollars, accounting for 34 percent of the nation’s total exports. But the outbound shipments of steel products have already begun to decline. Korea’s steel exports grew six percent last year, but they fell by seven-point-six percent in April this year and point-one percent in May year-on-year, due to import restrictions abroad. Also, high tariffs by the U.S., if realized, will deal a blow to South Korean auto exports, which have shown an upward trend as of late. The U.S. is the largest foreign market for Korean vehicles. Last year, Korea’s car exports to the U.S. amounted to 14-point-six billion US dollars, accounting for nearly one-third of total exports. On the semiconductor front, Korea’s chip exports in May made up 20 percent of its total export volume. But China, which is the biggest importer of Korean semiconductors, has begun a price-fixing probe into Korean chipmakers. Obviously, China is keeping its foreign rivals in check to promote its local industry, which does not bode well for the Korean semiconductor industry and economy as a whole. Professor Choi explains.
Growing trade protectionism will cause the export prices of Korean goods to rise. That means fewer Korean products will be sold in major markets, with local exporters suffering from a sales decline. This will lead to fewer jobs. To avoid protectionist trade measures, companies may build factories in the U.S. to produce goods locally. This case, too, will reduce jobs in Korea, where the employment issue is very important. Overall, trade protectionism will hav