Bank of Korea: "Need to Seek Response to COVID-19-Induced Protectionism Trend"

[Asia Economy Reporter Kim Eunbyeol] In light of the strengthening global trend toward protectionism due to the impact of the novel coronavirus disease (COVID-19), there are calls for South Korea to seek alternatives for its export industries.

On the 3rd, Lee Dongwon and Lee Arang, research fellows at the Bank of Korea Economic Research Institute, stated in the BOK Issue Note titled "Directions and Implications of Global Industrial and Trade Policy in the Post-COVID Era" that "We must prepare for the possibility that the retreat of globalization caused by COVID-19 could negatively affect South Korea, which has a high dependence on trade," and added, "It is necessary to devise measures to expand export opportunities during processes such as the reorganization of the global value chain (GVC) and the establishment of trade norms related to service trade."

The BOK Issue Note identified key response measures including ▲expanding strategic cooperative relationships with countries that have signed free trade agreements (FTAs), ▲supporting the adaptation of major industries to the trade environment amid GVC restructuring, ▲seeking to expand exports of domestic ICT companies and cultural content, and ▲participating in international discussions on climate change and the establishment of international norms within multilateral economic forums.

As tendencies toward protecting strategic material industries and reshoring (the return of companies to their home countries) have strengthened following the COVID-19 pandemic, trade measures led by the United States may increase, necessitating appropriate responses. Accordingly, the researchers emphasized that South Korea should lead trade negotiations with various countries and actively participate in issues such as the restructuring of the World Trade Organization (WTO) and revisions to industrial subsidy regulations.

They also suggested that a company-led approach providing long-term and stable support is needed for firms considering reshoring to manage supply chain risks after the pandemic. Building a domestic ecosystem for the materials, parts, and equipment industries, which have high overseas dependence, is also necessary. Furthermore, South Korea should actively attract sectors where it can replace China during the supply chain restructuring by advanced countries, while promoting service sector liberalization and considering changes in the trade environment such as increased costs due to strengthened obligations under climate agreements.

They predicted that global responses will increasingly expand in areas such as non-face-to-face and digital service sectors and climate change issues. Additionally, they advised leveraging the high international recognition of South Korea’s COVID-19 quarantine measures and playing a balancing role by emphasizing the historical responsibility of developed countries in discussions on imposing enforceability in climate change agreements.

This content was produced with the assistance of AI translation services.