Bracing for Trumpism

U.S. President-elect Donald J. Trump is flexing his muscles in global trade. Following an earlier vow to thwart Carrier and Ford’s plans to move their plants to Mexico, he has put the brakes on Toyota’s ambition to build its factory in Mexico. Trump pressured the world’s No.1 carmaker to “either build factories in the United States or pay a 35 percent tariff” when its automobiles cross the border. Toyota pleaded with him not to levy excessive penalties as it already hires 136,000 U.S. workers for 10 plants across the country, but Trump is adamant to the complaint. The same fate can befall us given our cars and electronic products Korean companies produce in Mexico for export to the U.S, market.

Trump’s message is clear. He wants foreign companies to manufacture products in the U.S. and employ Americans. He does not seem to care about expected side-effects at all. In fact, U.S. citizens can purchase cars and other necessities at much cheaper prices thanks to low wages in Mexico or China. But the “border tax” championed by Trump can trigger global trade disputes which can shake the very foundations of free trade. Nevertheless, the tycoon-turned-president-elect shouts “U.S. jobs first” no matter what.

War over jobs has crossed borders long ago. All advanced economies are bent on luring global companies to their countries. Korea is an exception: instead of building companies in Korea, our conglomerates set up factories overseas en masse to take advantage of low wages. The Korea Automobile Manufacturers Association (KAMA) announced Monday that Korea last year ranked 6th place in the global production of finished vehicle following India. Our car production plunged to 4.22 million units last year, a 7.2 percent decrease over the previous year. Slowed export and domestic consumption played a big part, but there is a fundamental reason: more production costs, hard-line unions, and anti-corporate public sentiment.

For instance, Hyundai Motor workers on average receive an annual salary of 96 million won ($79,602), about 20 million won more than their counterparts in Toyota or Volkswagen. Due to the high cost and low efficiency, Hyundai and Kia Motors did not build production plants in Korea since 1996. Kia Motors’ factory in Mexico is exempt from corporate tax for ten years, not to mention free land. Under such circumstances, all local companies would leave Korea. To lure our companies back, the anti-corporate sentiment must first change. But our politicians are engrossed in raising corporate tax and reinforcing regulations. Such outmoded strategy can never win in the global battle for jobs.

JoongAng Ilbo, Jan. 10, Page 30