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The Flap Over South Korea’s Alleged Campaign to Keep Out Imports : Commerce: U.S. officials say Seoul has pressured companies and consumers to “buy domestic” because of a shrinking trade surplus. South Korea says it has been trying to persuade citizens to eschew luxury items, not imports.

WASHINGTON POST

Of all the obstacles and frustrations that American companies have encountered trying to sell goods in the South Korean market, nothing quite matches the recent publication of a comic book titled “Our Body and Soul.”

The comic book, which was distributed in primary schools to about half a million South Korean children, discourages the purchase of imported food. It portrays a teacher telling his students that farm products from abroad contain poisonous chemicals, antibiotics and radioactivity. The teacher also urges the children to make sure that their mothers buy no imports.

“Why don’t we all follow our mothers to the market and monitor them?” the teacher asks.

“OK,” the class agrees.

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The comic book, U.S. government and business officials in Seoul say, is symptomatic of an officially inspired campaign against imports that started last spring and has recently reached near-hysterical proportions. The American Chamber of Commerce in Korea says the 56-page book is one of the most egregious in a series of actions--ranging from new taxes to official harassment--that are intended “to increase the anti-foreign bias of an already difficult-to-crack market.”

The government asserts that it had nothing to do with the comic book, which was published by a national federation of farmers’ cooperatives. The comic book’s message, officials added, was regrettable. Americans find the explanation difficult to swallow in view of the fact that the farm federation became independent of the government only last year.

Many Americans and Europeans here view what has been happening as a classic case of a protectionist-minded country flouting the spirit of free trade. They contend that South Korea deliberately sought to curb imports when the nation’s trade surplus started to shrink. The government, they add, ended up losing control of the situation because of Koreans’ traditionally xenophobic impulses.

“I think the government underestimated the momentum this would generate,” said Robert J. Gregory, president of the American Chamber of Commerce.

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South Koreans say the U.S. interpretation reflects a complete misunderstanding of their economic system and culture. What appears to outsiders as a government campaign against imports, they say, is actually a widely supported social movement against consumption of luxury items in general, based on the traditional Confucian value of frugality. Many South Koreans believe that it is desirable to curb the extravagant purchase of fancy cars, clothes and food by the nation’s nouveau riche.

But not all the friction is merely cultural. Several consumer groups, angry over perceived U.S. “interference” in Korea’s domestic affairs, threatened a boycott of American goods unless the United States apologized for its trade pressure. And even the semi-official Yonhap news agency weighed in recently, declaring: “If date rape is what happens when a man forces his attention on his girlfriend, then what the United States is doing to Korea in the name of free trade deserves to be called trade rape.”

The controversy is raising the prospect of a nasty turn in relations between Washington and Seoul, which before now had been staunch allies in the fight against communism.

With exports of about $20 billion each year to the United States, South Korea’s largest trading partner, Seoul’s huge conglomerates have become formidable competitors in a wide array of industries, and U.S. trade officials are much less willing than before to overlook South Korean transgressions.

The atmosphere has dramatically changed from last year, when trade ties between the nations were warming and Seoul pledged to take steps to open its market--a promise that led to a U.S. decision to leave South Korea off a list of countries deemed unfair traders.

The South Korean government, now alarmed over the possibility of U.S. retaliation, is trying to calm the situation.

On Nov. 23, Deputy Prime Minister Lee Seung Yoon called a news conference to clarify the “austerity campaign,” saying that it “should be carried out without discriminating against foreign goods.” Seoul also dispatched former Deputy Prime Minister Son Choo to Washington to assure American leaders that South Korea is keeping its promises.

And just last week, President Roh Tae-woo appointed as his new trade minister Lee Bong-suh, a choice that many observers saw as an effort to ease trade frictions between Seoul and Washington. Lee, who has college degrees from American universities and who worked at the Federal Reserve and the World Bank in Washington in the 1960s, is considered knowledgeable about U.S. affairs.

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With or without government encouragement, however, some South Koreans continued to stoke the flames of the anti-import campaign. A Dec. 6 article in Tonga Ilbo, a major daily newspaper, solemnly informed readers that “the following food items exported by the U.S. are known to be extremely harmful: tomatoes, beef, potatoes, oranges, spinach, apples, peaches, pork, wheat, soybeans, corn and grapes.”

The trouble began last May, when imports such as big U.S.-made refrigerators, foreign clothes and color televisions suddenly started becoming difficult to find in South Korea. Boutiques specializing in imports were closed. The Mercury Sable, which had started becoming popular, was removed from auto showrooms.

Retailers said they were complying with government requests to stop selling such items.

Consumers also got the word: Buying imported luxuries became known as a sure way to invite an audit by South Korean tax authorities.

What was going on? U.S. Embassy and U.S. business officials concluded that it is more than coincidence that the events followed the appointment of a new team of economic policy-makers who came from the old school of Korean economic theory--dedicated to promoting exports and protecting the home market.

It also appeared more than a coincidence that South Korea was becoming concerned that its economic miracle was slipping away as its export performance slowed and imports grew. The trade surplus, which had reached $11.4 billion in 1988, began to fall into deficit this year.

“If Korea had had a positive trade balance, the campaign never would have gotten started,” said Gregory of the American Chamber of Commerce.

South Korean officials tell a different story. They say the campaign was launched because the middle and lower classes were growing resentful of the disparity between South Korea’s rich and poor.

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The government was merely responding to public demand for a more “decent” pattern of consumption--meaning less ostentatious spending in general, not necessarily fewer imports, according to Lee Ki Sung, director general of the trade cooperation bureau at the Ministry of Trade and Industry.

As evidence, Lee and other officials cite figures showing that during the current year, many products imported from the United States, such as cosmetics and alcohol, have actually registered huge sales gains.

But overall, U.S. imports have slowed substantially during the campaign, with virtually no growth occurring from May to October, compared to the same period the previous year.

Moreover, critics question Seoul’s contention that it was really targeting luxury goods in general. If that is so, they ask, why did South Korean luxury products such as the Hyundai Grandeur car continue to sell?

Recently, officials on both sides have tried to calm the situation. U.S. Ambassador Donald P. Gregg delivered a speech in late November, saying, " . . . Korea’s austerity campaign . . . is none of our business.”

Meanwhile, South Korean officials have assured American officials that the Sable and other foreign products are back on the market.

American businessmen say they just want to get back to selling their products, but it won’t be easy in view of the animosity that has been aroused.

“I don’t see this thing recovering overnight,” said R. Allen Patrick, vice president of Ford International Business Development Inc. in Seoul. “No matter how it was created or who is responsible, this has stirred up a real mess.”


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