Korean companies in China see no Thaad effect

Employees from 20 Korean companies doing business in China told the JoongAng Ilbo Thursday that they did not expect deployment of the controversial Terminal High Altitude Area Defense (Thaad) antimissile system to lead to trade retaliation against Korea.

Currently, 25 percent of Korean exports go to China.

“When the placement of Thaad in Korea was decided last week, the situation was not very good [in China] as if immediate trade sanctions would be imposed on Korea,” said Choi Yong-min, head of the Korea International Trade Association’s Beijing office.

“But thankfully, there hasn’t been a notable change so far. Still, we are tightening our monitoring of the Chinese government, as it can raise non-tariff barriers against Korea, which is a less visible way [of retaliation].”

“In terms of the liquid crystal display and semiconductor industries, [China] is dependent on Korea and Japan for supplying equipment and intermediary goods,” a semiconductor industry insider said.

“Without the supply from Korean partners, China will have difficulty meeting orders for their exports.”

Another factor to consider is that this year marks the 15th year since China joined the World Trade Organization, which means China is looking to gain market economy status from the United States and European Union. This would benefit China by allowing it to compare prices of its exports to local retail prices instead of higher prices in other countries, thus shielding it from antidumping tariffs.

If China retaliates against Korea, its third-largest trading country in terms of trade volume, the act could negatively affect China as it tries to attain market economy status by the end of this year.

Still, it does not mean Korea is free from any trade sanctions from China. There is a chance the government may pressure Korea through non-tariff barriers like stricter customs clearance standards and quarantine.

According to data from the Korea International Trade Association, among countries Korea is trading with, China had implemented the highest number of non-tariff barriers, 26 in total.

“There is plenty of chance that [China] could reject customs clearance on Korean consumer goods such as processed foods and cosmetics or disqualify those products by claiming inappropriate packaging,” said Han Jae-jin, a research fellow at Hyundai Research Institute.

Korean companies plan to take immediate measures to prepare for possible aftereffects while also keeping close watch on the situation.

“We think our Chinese business is relatively safe from customs retaliation since our goods sold in China are fully produced and distributed through the Chinese corporation,” said a spokesperson from AmorePacific, the nation’s largest cosmetics provider.

“But we are strengthening monitoring on a possible delay in new product approval and chances of the country imposing greater tariffs or changing the overall business environment for retaliation.”

Sales managers for Chinese tourists at Paradise, Korea’s largest operator of casinos for foreigners, are also refraining from excessive marketing and promotions that could possibly irritate the Chinese government.

BY KIM YOO-KYUNG, MOON HEE-CHUL [kim.jeehee@joongang.co.kr]