[Column] In praise of the trade warriors

Choi Yong-min

The author is the head of the World Trade Center Seoul and former head of the Institute for International Trade.

Warren Buffett, chairman and CEO of Berkshire Hathaway, is a guru of global investment. In 2022, he raked in profits after lifting his stakes in Japan’s general trading corporations like Mitsubishi, Mitsui and Sumitomo by nearly seven percent each. Why did he invest in those companies in Japan? That’s because they lead the global trade in oil, coal, wheat and nickel — a pivot to economic security — and control supply networks for Japan, the third largest economy.

Why does everyone recognize American economic power as the most powerful around the globe? Needless to say, that’s because the United States has a number of private companies dominating world markets through their global networks. As national security increasingly depends on acquisition of energy, many pay attention to what the U.S. president says. But market watchers’ eyes are fixed elsewhere. They detect upcoming fluctuations of international petroleum prices through decisions made by ExxonMobil, Texaco and other major oil companies in the U.S.

Since Russia’s invasion of Ukraine last February, many countries were forced to try to secure grain to feed their people. But you can hardly deny that the key to your food security is held by Cargill, the world’s largest trader of agricultural commodities. Founded in 1865, the U.S.-based multinational company controls the global grain market.

All countries compete to secure raw materials like crude oil, minerals and grains. Korea is no exception as it has to rely on imports for nearly all raw materials. But basically, the government is not a market player. Its role is limited to addressing glitches in the market.

As a whopping 4,000 products are included in a supply network warning system managed by the government, they must be managed by private companies in an efficient way. Considering the possibility of Korea’s trade with China going into a deficit in 2023 for the first time since the normalization of relations with China in 1992, the government must take a more careful approach to raw material security than before.

Korea could emerge as the sixth largest trader in the world as of 2022 thanks to the efficient operation of the seven largest general trading companies by Samsung, LG, Daewoo, Hyundai, SK, Hyosung, Ssangyong groups. They played a pivotal role in sustaining our exports. (They account for almost half of all Korean exports.) They are trade war veterans that fiercely fought on the frontline of global trade for our economic growth just as the independence fighters fought for political freedom a century ago. Those general trading companies need their experience, top-caliber talents, and global networks to slug it out in the global competition to secure critical materials.

The government must help our trade warriors reduce their risks so that they can win their battles on the field. It was the general trading companies that came forward to help the country in 2021 when it suffered an abrupt shortage of urea water solution due to China’s ban. But if such an emergency situation takes place again, they say they would never take the lead. As prices of urea water solution plunged after the situation improved, they suffered huge losses.

If our companies successfully secure raw materials under uncertain market conditions, the government must protect them from suffering further losses. It can learn from the Ministry of Agriculture, which lends money to farmers at low interest rates when imports compel them to suffer losses.

As overseas investment is arguably the surest way for stable management of critical raw materials, the government must help private companies secure them aggressively. The government must devise an effective program, including compensation and tax benefits, for the Korea Trade Insurance Corp. to cover the cost of their investment risks from raw materials overseas after defining stable supplies as a pivotal piece of social infrastructure.

The more private companies dominating global markets, the stronger our economic security. It helps boost national interests too. I sincerely hope the public and private sectors successfully overcome our export crisis and stabilize supply chains by reinventing the golden days of our general trading companies.

Translation by the Korea JoongAng Daily staff.