Why Korea Should Welcome Japanese Businesses

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Why Korea Should Welcome Japanese Businesses

Korea and Japan are taking steps to sign a free-trade agreement (FTA). A positive result would undoubtedly surprise the international community, as it would signify that the two countries - both notorious for their exclusiveness towards foreigners - intend to engage in free trade. Certainly, both countries harbor doubts as to whether such an agreement can be reached. There are heated arguments both for and against the proposed Korea-Japan FTA. Many Koreans would reject the proposal out of hand, not only on account of Seoul's chronic trade deficit with Japan, but also because of past conflict.

In spite of opposition, the free-trade agreement must be pursued at all costs - not because of pressure from Japan, but for the sake of the Korean economy.

We should not fear the prospect of Japanese products flooding the Korean market. We should overturn such concerns and become more aggressive instead. Come to think of it, who would stand to gain more if a rich household and a poor one were to open their doors to each other? Circumstances have changed dramatically from the past, both for Korea and Japan. The paradigms have changed. First of all, Korea's liberalization policy can now measure against that of any country in the world, to surpass even that of Japan, mainly spurred by the nation's financial difficulties of 1997 and 1998. It is now not uncommon for prestigious local firms to be taken over in their entirety by foreigners. It is becoming increasingly difficult to make a distinction between Korean and foreign corporations. Under such circumstances, Japanese entry into the Korean market is something that we should go out of our way to encourage. Korean companies have also come a long way from the past in terms of competitiveness and are now quite capable of taking on the challenge of entering the Japanese market. The conditions of the Japanese market have also undergone great changes in recent years.

A number of local firms would undoubtedly go bankrupt if faced with competition from their Japanese counterparts. While for some this would be attributable to a lack of competitiveness, even commendable firms that should not suffer from such a fate could become victims. Even so, we must greatly reinforce the policy of welcoming Japanese companies. It is not enough to allow them to enter Korea. We should take measures to make sure that they earn plenty of money in Korea. Only then would the president's declaration that Korea is "a country good to do business in" ring true. This would lead to a greater number of business start-ups and jobs. There is even the possibility of the Japanese products made in Korea later competing in the Japanese market. If we play our cards right, a substantial part of the Japanese industry, from technologies, capital and to facilities, could relocate to Korea. As for the trade deficit with Japan, we should not limit countermeasures to reducing imports, but also attempt to increase our exports.

After all, Japan's manufacturing industry is still the best in the world. We have to lure it into the country to find a way to survive ourselves. The situation is changing so that we no longer have to beg for technology transfers as in the past. Foreigners are coming to us on their own, no longer reluctant to transfer technology for fear of a boomerang effect. More and more foreign firms are deciding to enter Korea, not because they have a particular affection for the country, but as part of their own strategy for survival.

At the backdrop of the changes lurks the variable of China. China has already become the key competitor of the Japanese economy. Japan does not regard Korea as a rival to hold in check any more, but as an important partner. There have never been such encouraging factors in Korea's trading environment with Japan before. We should not be worrying about an inundation of Japanese products at such a time.

We must take every possible measure to attract Japanese capital and the Japanese people so that they swarm into Pusan, the closest foreign soil to Japan. Not only do we have to attract more Japanese capital, technologies and factories, but also devise all kinds of policies to captivate the Japanese so that we can make money from them. There can be no excuses if we fail to earn a profit from the people of the world's richest nation when it is only a stone's throw away.

A free-trade agreement is not the sort that can be concluded quickly. There is a great divide over the FTA in Japan, even among the government agencies. The Ministry of International Trade and Industry is trying to actively pursue the agreement, but other ministries remain reluctant. The Japanese people's resistance against imported agricultural products is even stronger than in Korea. It would not be easy to reach an agreement on the FTA, which would also accompany free movements of personnel.

For Korea, it would be more difficult to reach a public consensus than to exert pressure on Japan. Nevertheless, implementing a policy of attracting Japanese corporations is not a matter of choice. Regardless of whether the two countries sign a free trade agreement, pursuing such a policy is essential for the survival of the Korean economy. Korea must create the environment and opportunities for Japanese companies to come to Korea to make profits. This is globalization. If it succeeds, it will have the most traumatic effect on Japan. Instead of continuing to prove the small-minded Japanese right, Koreans should take the initiative to show them what globalization is really about.

by Lee Chang-kyu

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