Overcoming protectionism

The Korean economy is suffering multiple whammies, with external trade aggravated by self-serving currency and protectionist policies. The Bank of England cut rates for the first time in nearly seven and a half years from 0.5 percent to 0.25 percent, and signaled further easing moves before the end of the year to prevent negative outcomes resulting from the British vote to leave the European Union.

Developed economies have been competitively unleashing easy liquidity after the United States embarked on quantitative easing to combat the global financial crisis of 2008. Japan has also enacted an unlimited loose monetary program since 2013 and recently announced a new stimulus package worth $265 billion to prop up the stubbornly weak economy. China is mulling more easing actions after several cuts in the interest rate and loan reserve ratio failed to reverse a fast slowdown.

All five major economies except for Germany are loosening their coffers to revive the economy. Adding more gloom on the external front is protectionist trade platforms by U.S. presidential candidates ahead of the November election. With Korea’s economy hinging on exports, the country must come up with contingency plans to combat the wave of protectionist currency and trade actions in major markets.

Yet the president, government and legislature remain carefree and oblivious to the dangers. President Park Geun-hye in a recent Cabinet meeting observed the economy was showing signs of recovery. It makes one wonder what kind of data she has been reading to be so optimistic.

The Korean economy has been growing less than 1 percent for three consecutive quarters and shows no sign of strengthening. The only pillar that has been sustaining the economy is the construction sector, which could lose ground when U.S. interest rates go up and send repercussions to the dangerously high household debt. The Korea Development Institute in a recent report said the economy would not likely improve in the near future.

Exports have been falling for the longest-ever 19 straight months. The strengthening won and trade conflict will add troubles to the fragile local economy. The government must be resolute in carrying out corporate restructuring to ease overcapacity in the troubled shipping and shipbuilding industries and reform the industrial structure. It must upgrade the corporate environment to shift the industry toward a new growth sector based on the internet, automation and bioengineering.

The National Assembly must get its act together and cooperate with the government to find a breakthrough for the troubled economy.

JoongAng Ilbo, Aug. 6, Page 26