Exporters fear tighter regime after re-election

With the re-election of U.S. President Barack Obama, Korean exporters are likely to face higher trade barriers as Obama is expected to take stronger protective trade measures as the U.S. economy flounders.

Local trade organizations predicted yesterday that the second term of Obama will be a tougher period for Korean exporters even after the start of the Korea-U.S. free trade agreement in March of this year.

The Obama administration has been regulating what it calls “unfair” trade practices of its international trade partners for the past four years.

Last July, the U.S. Department of Commerce set final duties on imports of large power transformers from Korea, accusing Hyundai Heavy Industries and Hyosung Group of dumping the equipment in the U.S. market. The department plans to impose antidumping duties of 29.04 percent on Hyosung and 14.95 percent on Hyundai.

In October 2011, the Department of Commerce responded to a complaint by Whirlpool by concluding that washing machines made by Samsung Electronics, LG Electronics and Daewoo Electronics were sold below their production costs in the U.S. and set tariffs as high as 83 percent.

“There are growing worries that U.S. trade barriers for Korea might be higher during Obama’s second term even though he is an advocate of free trade,” the Korea Trade-Investment Promotion Agency (Kotra) said in a report.

Although the free trade agreement between Korea and the United States finally went into effect on March 15 after about six years of negotiations, Korea’s exports to the country declined this year, according to data by the Korea International Trade Association (KITA).

“If public opinion about the Korus FTA turns sour in the U.S., the government will have to add pressure on the Korean government on trade,” said Hong Ji-sang, a research fellow at KITA.

Korean exporters are also struggling to keep profitable as the Korean won remains strong against the U.S. dollar due to a third round of quantitative easing by the U.S. Federal Reserve.

“The price competitiveness of Korean-made products is being threatened by the weak dollar as the Obama administration is expected to continue QE3 measures,” Kotra said in the report. The U.S. economy is showing subdued signs of improvement, including in employment and industrial output figures, since QE3 was implemented in September.

Analysts at local brokerage firms said the impact of Obama’s re-election will be relatively positive on Korean stocks compared to if Mitt Romney had won the race.

In particular, there are possibilities for Korean exporters in the energy field. “As Obama pledged to promote renewable energy and energy efficiency, there will be increased opportunities for Korean solar and wind power firms to enter the market,” said Hong of KITA.

The benchmark Kospi closed at 1,937.55 yesterday, up 9.38 points, or 0.49 percent, from Tuesday, with political uncertainties surrounding the U.S. election put to rest.

The won rose against the dollar at 1,085.4 won, up 5.3 won from Tuesday’s close amid investor’s growing optimism that the U.S. is likely to stick to its quantitative easing measures.

This was the first time in nine trading days that the 1,090-won-per-dollar mark was broken.

“An Obama victory leaves less uncertainty for markets,” said Oh Seung-hoon, an analyst at Daishin Securities. “The continuity of the same leader in the U.S. means the country’s policies will remain consistent compared to Romney, who would have had completely new policies.”

“Obama’s victory means a continuation of the Fed’s third quantitative easing policy,” said Kwak Byeong-ryeol, an analyst at Eugene Securities. “The current monetary easing policy by Fed chief Ben Bernanke will be maintained, and talks for adopting stimulus measures to replace a second round of Operation Twist (OT2) will begin: either OT3, an extension of OT2, or a fourth round of quantitative easing (QE4) that centers on long-term buying of national treasuries.”

Analysts said stock prices of sectors that are likely to benefit from Obama’s triumph are alternative energy, health care and IT.

Obama made an election pledge that 80 percent of America’s electricity will come from clean energy sources by 2035. Shares of Korea Gas went up by 3.84 percent to close at 83,900 won yesterday, and BHI’s share price went up by 3.55 percent to 26,250 won as Obama’s plan includes nurturing the shale gas sector.

By Song Su-hyun, Kim Mi-ju [ssh@joongang.co.kr]