U.S. to Push for Open Trade in South Korea

Frustration is mounting in Washington over South Korea’s closed markets, making it likely that the United States will renew its demands for more open trade even before South Korea finishes its democratization process, according to a high U.S. official.

Washington’s exasperation over Korean foot-dragging--”excuse after excuse when it’s no longer justified”--has reached the point, the U.S. official said, that the United States may decide to hand South Korea what amounts to an ultimatum that “you open your market or face a closure of the U.S. market.”

Despite warnings from Koreans that U.S. trade demands will exacerbate anti-Americanism here, action may be taken against South Korea in December or January, before a new president is installed here next Feb. 25, the official indicated.

The only progress the United States has made in persuading Korea to open its market in the last five years, the official said, came after the Reagan Administration threatened to retaliate under Section 301 of the Trade Act of 1974.

“I personally am rapidly reaching the conclusion that . . . if you are not negotiating from power, Koreans will do nothing,” the official said. “We are very close to the limit.”

Protectionism Acknowledged

The Washington official, who asked not to be identified, spoke at a seminar of U.S. and South Korean scholars, business executives, government officials, politicians and journalists held under the auspices of the Seoul Forum for International Affairs, the Asia Foundation and the Institute of East Asian Studies at the University of California at Berkeley.

In an interview, the official said U.S. firms could register complaints against South Korea under Section 301 in the fields of cigarette imports, advertising and accounting. The Administration could then complain to South Korea about procedural practices, such as the country’s restrictions on licensing of importers or about impediments placed in the way of agricultural product imports.

A South Korean business executive summed up the outlook of his countrymen when he acknowledged South Korea’s widespread protectionism, but insisted that it “is still not a developed country” and thus needs the protection.

Poor productivity, the shaky financial structure of major business firms and a low level of technology, he said, “make it impossible for Korea to compete with other developed countries.” An opening of South Korea’s markets, he said, would cause “our industry to collapse. . . . We could not survive.”

The head of a South Korean research institute that has close ties to the government said Korea could do nothing now “because carrying out a program to democratize the country is far more important than opening its markets.” After weeks of widespread anti-government demonstrations, the authoritarian regime of President Chun Doo Hwan has announced a number of democratic reforms, including the country’s first free elections in 16 years.

A South Korean international affairs scholar said: “If all the American demands were met, what difference would it make?” He warned that if the United States presses its trade demands it could “send Korean democracy awry and make Koreans so anti-American that security ties between the two nations could be broken.”

“Politics and security should prevail over economics in U.S.-Korea relations,” he said.

Already Penalized

But all the South Korean appeals for sympathy and understanding fell on deaf ears within the group that met here. An aide to a U.S. senator, who took part in the conference, warned the South Koreans that “the results of pleading for more time will be disastrous.”

The United States this year has penalized South Korea for refusing to make farm trade concessions by slashing $1.2 billion worth of tariff preferences on imports of Korean manufactured goods into the American market, the official said.

The official criticized a South Korean policy statement issued in April promising special action to hold the growing trade surplus with the United States to about last year’s level of $7.1 billion.

“The thinking seems to be that if the numbers look better, trade problems with the United States will disappear,” the official said. “I don’t think so. The U.S. policy toward Korea is focused on access to Korea’s market.”

Some Cuts Meaningless

South Korean impediments or bans on imports run across the board, the official said, adding that “every step toward liberalization has strings attached to it.”

Even when tariffs are cut, reductions are usually meaningless in terms of spurring imports, the official said, citing as examples reductions in tariffs on certain industrial products to 80% from 100%. Agricultural tariffs, which have not been lowered, range from 45% to 100%. For example, a single banana sells here for up to $2.50.

U.S. cigarette makers were promised a 1% share of the South Korean market last September, but sales of U.S. cigarettes account for only 0.4% of the market.

Despite a new promise to open South Korea’s market to wine imports next Oct. 1, prohibitive tariffs promise to restrict imports of all but the least expensive foreign wines, the official said. Imports will be limited initially to only 10% of the market. In addition, the Korean government will designate only a few importers and “won’t open up the distribution system,” the official said.

Even in the only two successes the United States has scored--legislation to protect intellectual property rights and an agreement to allow two American insurance companies to operate in all fields of insurance--American trade negotiators are still battling with their South Korean counterparts over details.