THE PACIFIC : Problems to Air at Trade Program : Misconceptions Cited in U.S.-S. Korea Clash

Misperceptions among Americans and Koreans can have a chilling effect on trade problems between the two countries, according to the president of the Korean Economic Institute.

“On the U.S. side, the public perspective is that the U.S. market is wide open and Korea is closed. They (Americans) feel Koreans follow an industrial policy of subsidizing their companies and exports and that they steal our technology,” explained John T. Bennett, president of Korean Economic Institute, which is based in Washington but funded by Korea Development Institute, a think tank in Seoul, South Korea.

“On the Korean side, they view themselves as poor and the United States as rich. They ask ‘why are they pushing us around?’ They believe their market is opening, but they believe it hurts Korea, particularly in agriculture,” Bennett said in an interview Friday.

Some Curbs Implemented

He is one of the speakers at a program titled “Problems and Prospects in U.S.-Korea Trade and Technology Relations,” presented today by the Asia Society at the Sheraton Grande Hotel in Los Angeles.

Bennett says the Koreans are working hard to change America’s perspective since 40% of the country’s exports go to the United States. “The U.S. market is potentially more closed in a threatening way than Americans realized. This does have affect on Korean exporters particularly for cars,” he said.

South Korea does follow an industrial policy but no longer offers subsidies to specially designated export-oriented industries such as electronics or shipbuilding, according to Bennett. The government manages its economy for economic growth and full employment and has identified certain industries for growth.

Responding to U.S. pressures, South Korea is putting some curbs on its export policies for cars, textiles and footwear.

“The Koreans already have decided it can only expand autos to a certain degree,” Bennett explained. South Korea exports cars for Ford, General Motors and Hyundai.

Shipping more cars “becomes a threat to the United States. Chrysler tried to source a car from South Korea a few years, and the Korean government said no way. They already had too many eggs in that basket if the U.S. should clamp down. That’s called the chilling effect.”

South Korea is beginning to pull out of the textile and footwear businesses.

“Pricing and import quotas have really forced the companies into higher value output,” Bennett explained.

When American buyers looked to Korean footwear makers an alternative source from Taiwan suppliers, Korean manufacturers were not willing to expand their operations because of voluntary restraints on expanding footwear exports.

Opening Up Markets

Meanwhile, South Korea has worked to protect foreign intellectual property rights, such as patents and copyrights.

Its patent law has been extended to protect chemical or pharmaceuticals and it has extended its copyright law to foreign properties.

“At least the law is there,” Bennett said, “But enforcement is going to be a little problem still.”

He said South Korea is more of an open market than Americans believe.

“Korea has been working for 10 years to open up. Their tariff rates, however, are still quite high . . . but they have gone further, faster and are earlier in their development than Japan.”