International business task 2
“International Business Task 2” Page # 1 South Korea boasts the 11th largest economy on Earth. Possessing enormous trading power, it ranks12th in GDP and exports among all nations. Current foreign trade policies support building free markets and embrace globalization. An active member of the World Trade Organization (WTO), the Organisation for Economic Co-operation and Development (OECD) and Asia-Pacific Economic Cooperation (APEC), South Korea plays an important role in the world economy (Hwang, 2002).
The United States is one of South Korea’s most important trading partners. The two countries became political allies after the Korean War. Foreign trade and investment expanded rapidly in South Korea following the economic crisis of 1997. In the years since, investment by American firms in South Korea has grown to a total of $20 billion. The US firmly stands as one of South Korea’s top four export and import trading partners (Manyin, 2004). South Korea strives to continuously improve and expand trade with the US. Strengthening bilateral relations is crucial to South Korea’s economy.
South Korea is heavily dependent upon the American export market. However, the US is highly critical of the present barriers to trade. Debate over a lack of transparency dominated recent trade talks (Kim, 2005). Foreign trade pressures coerced the Korean government to privatize the state controlled banking system. Subsidies remain a point of contention. A unique characteristic of the South Korean economy is the chaebol – a family controlled business conglomerates. Hyundai and Samsung are well known examples. Chaebols receive government subsidies.
To avoid another economic collapse, like the one in 1997 which was triggered by chaebols going bankrupt, South Korea took measures to control corruption and increase opportunities for foreign direct investment. “International Business Task 2” Page # 2 Although a nationalistic attitude of resentment within South Korean corporate culture remains, further reforms are under way. Under President Roh, the Ministry of Information and Communication passed regulations that limited cellular phone Internet access exclusively to the WIPI platform.
WIPI is a Korean innovation developed by a government subsidized institute. After two years of negotiations, South Korea relaxed its policy to allow foreign competition (Manyin, 2004). A lack of transparency in regulations and policies contribute to bureaucratic delays and suppress opportunities for FDI. In trade disputes, the US considers the tariffs on agricultural products most forbidding. On average, South Korea levies a 66% tariff on agricultural imports. Compared to other members of OECD, South Korea has the least liberalized agricultural market.
Quotas also impede the import of foreign goods. For instance, South Korea requires movie theatres to fulfill screen quotas that limit the amount of time that imported films may be viewed. Furthermore, the US accused the South Korean government of manipulating foreign currency markets (Manyin, 2004). As trade talks continue, South Korea promises liberalization of markets and minimized intervention. President Roh hopes to enact a Free Trade Agreement with the US. First, South Korea must eliminate present barriers to fair and equal economic freedom (Kim, 2005).
A bilateral FTA will fail until transparency issues, subsidies, tariffs, quotas and currency manipulation are addressed. South Korean policy makers maintain that their nation is committed to free and open trade in the global market (Hwang, 2002). Heavily dependent upon its export market, South Korea promises continued liberalization and cooperation with foreign trading partners.
References Hwang, Doo-yun, (2001, Autumn). Korea’s International Trade Policy in the Global Age. East Asian Review, 13(3), pp 3-20.Retrieved November 27, 2005 from http://www. ieas. or. kr/vol13_3/13_3_1. pdf Kim, Anthony B. , (2005, November 18). Seoul Man: Opportunity Knocks for South Korea’s President to Usher in Free Trade. National Review.
Retrieved November 27, 2005 from http://www. nationalreview. com/comment/kim200511180821. asp Manyin, Mark E. , (2004, July 1). South Korea – US Economic Relations: Cooperation, Friction, and Future Prospects. CRS Report for Congress. Retrieved November 27, 2005 from http://www. fas. org/man/crs/RL30566. pdf.