he 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 have ripple effects on other industries and South Korea’s economic growth rate is expected to fall, affecting the public livelihood negatively.
Trade protectionism is the main unfavorable factor dragging down the economy. In June, the U.S. administration started imposing high tariffs on imported steel and aluminum products from the EU, Canada and Mexico, and they have filed a complaint with the World Trade Organization over the U.S.’ action. A trade war among major economies in the world and higher trade barriers will shrink global trade. South Korea, which depends heavily on exports, may face adverse effects such as job reduction and declining economic growth. That is why the government is urged to come up with a more sophisticated trade policy and a clearer vision for the future. Here again is Professor Choi.
As far as the manufacturing industry is concerned, Korea can fend off global trade protectionism only in a limited way. It’s like a competition on an uneven playing field. No matter how hard a player kicks the ball, the ball rolls down to the player after all. It is necessary to level the playing field, but that’s far from easy. Still, South Korea should make efforts. It could cooperate with other countries in a similar situation and bring up the issue with a concerted voice. In the Korean economy, it is the service industry that creates 70 percent of jobs. In reality, however, the service sector is relatively weaker than the manufacturing industry in terms of exports. There are limitations in creating jobs only in the manufacturing sector, which can offer 30 percent of jobs. The government must face up to the reality and promote exports in the service industry. If Korea manages to find major export items in the service sector, it can reduce the side effects of trade protectionism afflicting the manufacturing industry in some way in the mid-and long-term.
The upheaval in the global trade order as a result of spreading trade protectionism cannot be resolved with a stopgap measure. To overcome the difficulty, S