Recent Trends in Global Protectionism and Implications for Korea's Trade Policy and Strategy
World Economy Update Vol. 2, No. 3
13 Pages Posted: 4 Sep 2013 Last revised: 11 Oct 2013
Date Written: November 8, 2012
The global economic recession, which was prompted by the global financial crisis and is still being dragged by the Euro zone’s fiscal turmoil, is projected to continue for a longer period than expected. As the world economy is languishing, many countries are resorting to protectionist measures. The growing concern is that the more recent wave of trade restrictions is no longer a temporary response to the crisis, but rather becoming a long-term strategy for countries to develop their industries into major growth engines by shielding them from external competition.
- Over the past seven months, a total of 182 cases of trade restrictions have been taken across the globe, adversely affecting 0.9 percent of world imports.
It is not only the number of traditional trade remedies such as anti-dumping and safeguards that is growing, but potential import restrictions such as measures in the form of technology standards and customs clearance are also increasingly targeting Korean products. Further, more patent lawsuits are being filed against Korean companies in the global market.
- Both advanced countries and developing countries including BRICs have been adopting new measures restricting trade.
- Some countries including China, India, Southeast Asia and the Middle East are reportedly increasing the use of “technical barriers to trade,” which require costly certification and delay customs process for exporters.
- The number of cases where Korean products are subject to investigation potentially restricting trade is growing. Some of those products are heavily dependent on countries where investigations are currently underway, raising concerns that a ban on imports could have a significant ripple effect down the road.
- As Korean products have emerged as one of the major targets in the global market, the number of patent lawsuits is on the rise, evidenced by those between Samsung and Apple, and Kolon and DuPont.
In order to effectively respond to the increasing number of trade restrictions, it is important for Korea to draw up preventive action plans and build necessary infrastructure. It is also recommended for Korean exporters to diversify their export markets so that they can avoid being an easy target in a particular country, to develop innovative marketing strategies of incorporating cultural elements such as the Korean Wave (Hallyu) into exporting goods, and to make efforts in localizing their products and production facilities.
- As evidenced in the case of Japan which minimized the fallout from trade disputes through overseas direct investment and the cases of Korean companies that have recently made successful inroads into foreign markets, it is time for Korean exporters to go beyond just maximizing sales through exports and move toward exploring ways to carry out structural changes by combining exports and local production. Further, it is recommended for Korean companies to increase practices of corporate social responsibility, which will help raise their profile in local markets and localize their products.
Keywords: Protectionism, Import Restrictions, Trade Policy
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