Kotra warns of risks in U.S., China

The Korea Trade-Investment Promotion Agency in its 2018 outlook Tuesday suggested managing the risk from protectionism in the United States and China while expanding ground in Southeast Asia and India as the main trade tasks of the year.

In the United States, focus will be on renegotiating the Korea-U.S. free trade agreement and coping with President Donald Trump’s America First policies. The agency advised making aggressive investments like establishing affiliates in the United States or building factories to avoid protectionist risks.

The report also called for more attentive preparation and exchange of information between the government and Korean companies exporting steel and chemicals to the United States, as products from the two sectors were most frequently subject to antidumping investigations last year.

The office forecast improved trade relations with China compared to last year, when Beijing clamped down on Seoul for installing a U.S. missile shield with trade retaliations.

But it added that a decline in exports of Korean intermediary goods like semiconductors and components for electronics will be inevitable. The report cited a projected growth rate of 6.5 percent in China this year, slower than previous double-digit figures, and Beijing’s enforcement of environmental protection regulations.

A stronger government drive in China to make sure companies find suppliers within the country and develop technology rather than import parts is another possible risk for Korean companies.

But, the agency added, the expansion of China’s domestic economy could create business opportunities in e-commerce, silver and eco-friendly industries.

Southeast Asia and India will gain greater importance as trade partners this year. The International Monetary Fund assessed that these two markets will post economic growth rates of 5.2 percent and 7.4 percent in 2018, thanks to their vast population, growing middle class and rapid urbanization.

The trade promotion agency urged local companies to actively take advantage of the free trade agreement between Korea and Southeast Asia, pointing out the low utilization rate. Many Korean companies are still unaware of the tariff benefits that they could receive.

The report concluded that protectionist policies were a universal trend not only in the United States and China but also emerging markets and advised the general trade strategy take a new direction from merely importing goods and establishing new facilities abroad to opening partnerships and joint tech research projects that will mutually benefit both sides.

European companies, for example, have been making active moves to upgrade their IT equipment, which increased demand to find global partners for tech development.

On Tuesday, the Korea Trade-Investment Promotion Agency held an info session on trade in 10 countries. Heads of foreign offices in those countries shared their insights and advice with local companies on doing business abroad.

BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]