Kang Insu, President of the International Trade Association, "US Trade Expansion Act May Target Semiconductors"

Suggestions for the New Era of Protectionism

Trump Expands Targets to Steel and Automobiles
China's 5G, Huawei, and Semiconductor Rapid Growth
Concerns Over Negative Impact on Korea, the No.1 Memory Market
Active Engagement with US Congress, Industry, and Consumer Groups... Must Explain "No Threat to Security"
Best to Prevent Issues from Arising

US-China Conflict Requires Response Logic for National Interest
Must Maintain Position as a Market Economy and Free Country

In Korea-Japan Trade Dispute, Japanese Companies Suffer More

Kang Insu, President of the International Trade Association (Professor of Economics at Sookmyung Women's University), is being interviewed by Asia Economy on the 23rd. / Photo by Moon Honam munonam@

[Asia Economy Reporters Joo Sang-don and Moon Chae-seok] Amid the spread of new protectionism centered on the United States, concerns have been raised that semiconductors, South Korea's main export item, could become a target. Kang In-soo, President of the Korean International Trade Association (Professor of Economics at Sookmyung Women's University), emphasized in an interview with Asia Economy on December 23 last year, "It cannot be ruled out that the scope of Section 232 of the Trade Expansion Act, which the U.S. has applied to steel and automobiles, could be expanded to include semiconductors," adding, "Proactive and aggressive outreach activities should be carried out in advance regarding this."

Professor Kang pointed out that it will become increasingly difficult for South Korea to maintain the 'strategic ambiguity' it has adopted so far amid the ongoing U.S.-China trade conflict, and stressed that 'principled cooperation' is important regardless of which country Korea cooperates with. He added, "The principle is that national interest comes first, and national interest should be based on market economy and liberalism, not unconditional nationalism."

The Korean International Trade Association was founded in 1995, the year the World Trade Organization (WTO) was launched. In the rapidly spreading situation of protectionism and nationalism, we met with Professor Kang to hear his suggestions on South Korea's trade policy. The following is a Q&A with President Kang.

- So far, the spread of protectionism worldwide due to the U.S.-China trade dispute has directly affected South Korea with various adverse effects, including a decrease in global trade volume. In particular, the U.S. is trying to apply 'Section 232 of the Trade Expansion Act' to automobiles following steel.

▲ U.S. President Donald Trump has revived Section 232 of the Trade Expansion Act, which had been virtually dormant, imposing tariffs of 10-25% on steel and aluminum imports entering the U.S. Section 232 allows the U.S. to urgently restrict imports or impose high tariffs if foreign imports are judged to threaten U.S. national security. President Trump may continue to actively use Section 232 citing security reasons. In the case of steel, South Korea accepted export quotas to receive tariff exemptions and moved past the issue. The next target is automobiles, where regulations may tighten focusing on future cars such as electric vehicles. However, the possibility of automobile import restrictions based on security being applied to South Korea does not seem high, but it is uncertain how things will develop over time.

The worrisome issue is semiconductors. Although there has been no mention yet of semiconductors under Section 232, there is a possibility they could become a target. South Korea leads the memory market, but China is rapidly catching up. The U.S. is concerned about China's growth in 5G and companies like Huawei. Because of this, it cannot be assured that semiconductors will be completely excluded from Section 232.

- What preparations should South Korea make in case semiconductors become subject to Section 232?

▲ In fact, the only way is to proactively conduct outreach. We need to explain and make the U.S. Congress, semiconductor industry, and consumer groups understand that Korean semiconductors do not threaten U.S. security. We must accept the situation where the U.S. is setting global standards and continuously send direct and indirect signals that "we (Korea) are cooperating with you (the U.S.)." We need to keep confirming that we are maintaining a cooperative system in practice. Relationships with U.S. companies such as Qualcomm and other semiconductor equipment companies related to 5G are also important. It is best to sufficiently explain to U.S. semiconductor stakeholders that "we are working closely with you" to prevent issues like Korean semiconductors becoming subject to Section 232 from arising.

- The U.S. and China are expected to sign a first-phase trade agreement soon, but uncertainties remain high. How do you foresee the future of the U.S.-China trade conflict?

▲ The U.S. presidential election will be held in November this year. President Trump emphasizes 'America First,' but ultimately his biggest goal is, of course, re-election. The most significant factor affecting re-election is the U.S. economy. How the U.S. economic situation develops is the most important factor in whether the U.S.-China trade conflict expands or calms down. Although U.S. stock prices recently hit record highs, if the U.S.-China conflict worsens, trade shrinks, and retaliatory tariffs are imposed, negative effects are inevitable. If President Trump judges that the economy will worsen to a degree that he cannot handle or that will affect his re-election, he will not allow further deterioration. If the current economic situation does not hold, he will have to focus more on economic stimulus measures such as lowering interest rates while keeping the China issue in a lull, as in the first-phase agreement. Conversely, if he judges the situation as 'bearable,' the conflict will intensify. In elections, cohesion arises when there is a common enemy. Creating an external 'bad guy' rather than internal enemies helps unite people. Although the U.S.-China conflict negatively affects the U.S. economy, if it is judged that it is 'not a factor that will decisively worsen the economy,' the U.S. may take a tougher stance. This perception is shared by both the Republican and Democratic parties. If making people angry at China as 'those bad guys' helps in elections, the Democrats may do the same.

- What stance should South Korea take amid the U.S.-China conflict?

▲ There is actually nothing we can directly do toward the U.S. and China. It is also difficult for us to take the lead in mediating issues like the U.S.-South Korea defense cost-sharing and North Korean nuclear problems. Therefore, the stance we have taken so far is 'strategic ambiguity.' In a negative sense, it could be described as 'switching sides,' but it can be evaluated as having been tactful according to our situation. However, maintaining this ambiguity will become increasingly difficult. Depending on the situation, it will become inevitable to clearly side with one or the other. Even then, there must be at least a minimum justification. When the top justification is 'national interest,' from the standpoint that 'we are a market economy and free country,' principled logic that examines 'who is more unfair' should be pursued. From this perspective, China can be seen as having more unfair aspects that undermine market economy competition. From the U.S. perspective, policies like 'Made in China 2025' or China's 'One Belt, One Road' initiative are unfair in their process. The logic of market economy and liberalism is the foundation of capitalism, and almost no country denies it. When South Korea has to take a clear stance in the future, this should be the principle.

- What is the solution to the South Korea-Japan trade dispute?

▲ What crime have Japanese companies that sold things like hydrogen fluoride to Samsung Electronics committed? From the perspective of Japanese companies, they build technology and supply to Samsung, their largest customer, so if this is blocked, Japanese companies will also suffer. Such phenomena are actually occurring. Naturally, there must be dissatisfaction within Japan. From South Korea's perspective, after filing a complaint with the WTO, there was little meaning, so it was 'all stopped.' Even if pursued, it does not end at the first trial but goes to the second, but there is only one remaining appellate judge, so the trial cannot proceed.

From a trade perspective, this is not an issue to be resolved through complaints. Neither South Korea nor Japan would expect the trade dispute to be resolved by arguing 'whose claim is right' in a trade context. Ultimately, it is necessary for the leaders of South Korea and Japan to reach a compromise at an appropriate level to prevent greater damage to the private sector and restore cooperative relations between the two countries.

Profile of Kang In-soo, President of the Korean International Trade Association

▲ Bachelor of Economics, Seoul National University (1981?1985)

▲ Ph.D. in Economics, UCLA Graduate School (1987?1991)

▲ Professor, Department of Economics, Sookmyung Women's University (2002? )

▲ Consultant, United Nations Development Programme (2003)

▲ Invited Research Fellow, Korea Institute for International Economic Policy (2006?2007)

▲ Member, National Tax Precedent Review Committee, Ministry of Strategy and Finance (2007?2009)

▲ Consultant, Asian Development Bank (2009?2010)

▲ Director, Institute of Economic and Business Research, Sookmyung Women's University (2010?2012)

▲ CEO, Hyundai Research Institute (2015?2017)

▲ 24th President, Korean International Trade Association (2019? )

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