Concessions to U.S. on Trade Spark Anger in South Korea

Settlement in July of the trade demands that President Reagan made to South Korea in September, 1985, helped head off U.S. protectionist action that could have caused severe damage here. But it touched off a wave of anti-American sentiment in South Korea.

Finance Minister Chung In Yong was vilified in the National Assembly by representatives of the ruling party as well as by the opposition.

A member of the ruling Democratic Justice Party said Chung had made “fools of the people” by agreeing to set aside 1% of the Korean cigarette market for foreign brands, mostly American. A member of the opposition called him “immoral.”

Kum Jin Ho, the Minister of Trade and Industry, fared even worse. A member of the opposition demanded of him: “Are you a minister of the Korean government or of the U.S. government? Do you have any national pride?” Two members of the ruling party told him to “stop your sophistry and excuses and apologize!”

Chung is still the finance minister, but Kum has been dismissed. South Korean officials insist that Kum left in a routine reorganization of the Cabinet. But no such explanation was offered earlier in the year, when Kim Ki Hwan, the government’s chief trade negotiator, was unceremoniously ousted after openly advocating a more aggressive approach to opening South Korea to foreign trade.

Cautioned Americans

Rep. Rhee Shang Hi, a member of the ruling party and chairman of the National Assembly subcommittee on trade, even suggested that the U.S. trade demands might undermine the alliance under which the United States keeps 40,000 troops here.

He said that on a recent visit to the United States, he cited the growing anti-Americanism here in the course of urging American officials to stop pressuring for a “hasty” opening of South Korea’s market.

All this was brought on by the government’s announcement of a series of measures aimed at settling a textile dispute, guaranteeing copyright protection and providing increased scope to American insurance firms.

The 1% share of the cigarette market, which was not among the American demands, was thrown in to avoid the sort of attack that American makers have mounted on cigarette markets in neighboring Japan and Taiwan. For years, to protect the domestic tobacco industry, foreign cigarettes have been outlawed here; any Korean caught smoking them is subject to a fine of $57.

Veto of Protectionist Bill

But, in part because of the South Korean government’s efforts to satisfy the U.S. complaints, President Reagan was able, in August, to beat back an attempt in Congress to override his veto of a bill to curb imports of textiles and shoes, two of South Korea’s main exports to the United States.

Government officials here insist that the anti-Americanism is confined to small bands of radical students. But the emotional outbursts in the National Assembly seem to suggest otherwise.

Shin Dong Oh, director of the Americas division of the Ministry of Trade and Industry, acknowledged in an interview that “most of the people and the politicians didn’t like the action our government took” in response to the American trade complaints.

“Our people feel that the United States is pressuring Korea too much--more than any other country--and it makes them uncomfortable,” he said. “I, too, feel that it’s too much.”

He said that the “closed nature of the South Korean market” is not the reason for South Korea’s growing trade surplus with the United States. The main reason “is the lack of competitiveness of American industry,” he said, and added:

“If the United States doesn’t have the will to improve its international competitiveness, it won’t be able to solve its trade deficits.”

Koreans, Shin said, have a problem of perception: They are not convinced that their trade surpluses are permanent, and as a consequence they focus not on their surplus with the United States but on their huge foreign debt of $47 billion.

Despite the intensity of the outburst, calm has been restored for the time being, and Shin said he hopes it continues.

What is needed now, he said, is a cease-fire in Washington’s demands on South Korea. But U.S. officials say this is not likely.

According to one high-ranking American, with the dollar nearly as strong as ever against the Korean won, and with the American trade deficit here growing faster, in percentage terms, than the deficit with Japan, the United States will continue to press its demands--while bracing for further condemnation.

“That’s the price we’ll have to pay,” the official said, to avoid protectionist action by Congress.”

“We’re going through a difficult transition,” he went on. “As Korea becomes an advanced exporting country, selling cars and computers abroad, it simply must open up its market.”

Commercial Agents

Richard L. Walker, who is to leave his post as U.S. ambassador here on Oct. 25, said in an interview that his successor and other U.S. diplomats around the world should act more aggressively in the interest of trade.

In Seoul, he said, the ambassadors of other countries “spend 95% of their time acting as commercial agents for their countries, and we’re going to have to learn to wade in, because it’s a highly competitive world.”

Walker said that he is concerned for the future of U.S.-Korean relations and that one of the elements of this concern is “the intensive intrusion of commercial and trade issues into our political relationship.”

This year, South Korea is expected to have a current-account surplus of $2.5 billion, its first such surplus ever--and another U.S. official said privately that for this reason, Seoul’s case for continuing to protect its domestic industry is wearing very thin.

Also wearing thin is South Korea’s growing reliance on the American market to absorb its exports. Through the first seven months of this year, South Korea shipped 40% of its exports to the United States, up from 36% last year.

The country’s trade surplus with the United States, which amounted to $4.8 billion in 1985, is expected to reach about $7 billion this year. In the first eight months, Korean exports to the United States increased by 30.3%, while imports of American goods increased by 3.4%.

Moreover, a new tidal wave of American red ink seems likely to hit next year, when two more South Korean auto makers join Hyundai Motor Co. in starting passenger car shipments to the United States.

This year, a U.S. official predicted, Hyundai will ship 200,000 cars to the United States. Next year, with exports from Daewoo and Kia added, total South Korean auto shipments are expected to reach 400,000, possibly as many as 500,000. These are figures, the official said, that “will raise a red flag.”

By 1990, the three Korean auto makers will have nearly quadrupled their production capacity to 2,256,000 units a year, according to the Ministry of Trade and Industry, and their plans call for exporting more than half of the total production, with the greater part of it going to the United States.

Hyundai has announced a plan to procure parts in the United States, but so far there have been virtually no such imports from the United States. As of now, nearly all foreign parts are bought in Japan.

Demanding Immediate Access

Still on the list for which the Americans are demanding immediate access to the Korean market are 19 products, including computers. They also want prohibitive tariffs slashed for 27 other products. Except for the insurance business, all American service firms--banking, warehousing, shipping, even advertising--remain shut out more completely here than in any of the other industrializing nation of Asia, according to U.S. officials.

“And the whole area of agricultural trade hasn’t even begun to be addressed,” one said.

Shin, the trade ministry official, agreed that conflict over agricultural trade promises to be “the major problem” in the future.

Moreover, the United States reportedly plans to drop 57 South Korean items from the list of products that enter the United States at reduced duties under the generalized preference system, and this threatens to touch off a new round of protests here.

South Korean officials say that this action, if carried out, will wipe out $100 million in exports, all from struggling small firms.