Exports take a backseat to home front

The government made a remarkable shift in its overseas economic policy when it decided to focus more on the domestic economy and creating jobs than on increasing exports.

According to the Ministry of Strategy and Finance yesterday, Hyun Oh-seok, deputy prime minister for the economy, announced the policy shift at the first ministerial meeting on overseas economic policy held at the Seoul government complex.

“Our economy has achieved quantitative growth by aggressively increasing exports for the past few years, but the achievement hasn’t been evenly distributed to other parts of the domestic economy,” the ministry said. “Competition in the global market has become much fiercer, while the country’s internal growth potential has weakened.”

The government believes the former government was overly focused on signing free trade agreements (FTAs) with advanced economies to ramp up exports.

The Lee Myung-bak administration allegedly kept the local currency low to encourage businesses to increase exports and promote overseas sales. The administration expected companies to make domestic investments in facilities and employment with the increased profits abroad, but that didn’t happen.

According to surveys by the numerous economic institutions, about 70 percent of the increased profits were invested in production facilities in other countries.

The country’s overseas economic policy will shift to creating jobs in the domestic market, the ministry said.

Korea’s new target markets will be emerging economies rather than advanced markets.

At yesterday’s meeting, Hyun said Korea needs to brace for changes in global trade as the United States and European Union move toward an FTA. The two countries will start negotiating in June with a goal of finishing by the end of 2014.

The government projects a U.S.-EU FTA would significantly affect Korea’s exports to those markets.

According to the Finance Ministry’s estimates, exports to the United States and EU would decline by $167 million and $217 million, respectively.

Korea’s GDP growth also is forecast to fall 0.05 percent 10 years after the FTA deal is implemented.

By Song Su-hyun [ssh@joongang.co.kr]