[INSIGHT]Trade system needs wake-up call

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[INSIGHT]Trade system needs wake-up call

I'll come right out and say it: There is something seriously wrong with our trade system. What's so wrong with it? Nothing -- if you don't count that it's still meandering a few years in the past while our trade paradigm has lurched light-years ahead. Our trade paradigm has changed, and there are at least six fundamental ways in which I can tell you how it has changed.

First of all, there is not much the Korean government can do for Korean businesses nowadays. In the good old days, there were useful things such as export subsidies or nontariff barriers, numerous little ways our government could help our businesses directly or indirectly. Now, we have World Trade Organization regulations to follow.

Second, though I've mentioned "our government" and "our business," there actually is no more "our" or "we." "We" has become an ambiguous term. With 60 percent of Samsung Electronics owned by non-Koreans, who is this "we" that "we" are trying to help?

Third, what we perceive to be the true way to help Korean companies has changed. As can be seen in the case of Samsung's "Anycall" mobile phones, only Korean products that have challenged and won battles against foreign products within the domestic market have any chance of survival in the outside world as well. Pampering Korean companies with protection does not help but rather worsens their position in the long run by weakening the firms' competitiveness.

The fourth change is found in the Korean products themselves. Korean products are no longer confined to cheap commodities. There are more than 100 Korean products that are acknowledged among the world's finest. Korean products are no longer cheap, and companies no longer need to rely on dumping strategies.

Similarly, the domestic market has changed as well. In the past, the domestic market was a market in which domestic products vied with one another for petty shares in petty competitions. Now, Korea is among the world's top 15 markets, and Korean products can compete with almost any product worldwide. A recent study showed that nearly half of the small and midsized firms in Korea are already exposed to competition with foreign products. Competition now begins right in our own back- yard. If you don't make it past the domestic level, you can forget about the outside world.

International trade is now defined by a "rule of law." With the establishment of the World Trade Organization system, all countries have equal rights and equal duties, and no country can demand compliance to arbitrary decisions from its trade partners. International trade has now become a battle of logic and rationality, not force or nationality.

How are we to adjust to these six changes? What specific steps are we to take? There are three urgent tasks we need to undertake. We need to structurally establish the practice of fair competition within our domestic market. We need to bring the level of our trade-related government administration up to global standards. We need to convert our trade strategies from defensive to offensive.

What do I mean by global standards? Consider the International Trade Commission of the United States. That group is one commission that sticks to global standards. It makes sure that no importers play any tricks like dumping goods on the U.S. market and gives enormous assistance to the U.S. companies in acquiring fair competition. Korea wants a trade commission like that, too. As a matter of fact, we do have a trade commission. Do you know what this commission does? If you don't, you're not alone. Nine out of ten CEOs of small and mid-sized firms have said that they do not know why the commission exists.

With the World Trade Organization system in place, the decision-making procedures and the policies of all member countries' trade commissions will be clear to one another. We need experts who know what they're doing when they make decisions and implement policies according to the laws and precedents acknowledged in international society.

Seven out of eight members of our trade commission are nonpermanent members. Even a "permanent" member of the commission lasts on average less than one year. We are going to a war without bullets when we are leaving our trade commission at such an inexpert level.

This age of international trade calls for an offensive, not a defensive trade strategy. Korea must be the only country in the world with significantly ongoing trade but no free trade agreements. We need to be awakened to the reality that this is an economic war, and that trade has its independent priorities apart from industrial or diplomatic policies.


The writer is the dean of the graduate school of business administration at Sejong University.

by Junn Sung-chull

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