"New Cold War Era: Need to Establish a 'Presidential Direct Economic Security Agency'"

KIEP Report
'Changes in the International Economic Order and Our Response After the Pandemic and War'
The US Has the National Economic Council, Japan Has Economic Security Measures

The global economic integration completed at the end of the 20th century has been fractured by COVID-19 and the Russia-Ukraine war. Through these historic events, the United States and China have taken separate paths in monetary policy and crude oil procurement. Since then, the U.S. has fallen into an inflation gap while China faces a deflation gap. Although they need each other more than ever, the escalating conflict between the two countries shows that we have entered a new Cold War era.

"The U.S. Inflation Reduction Act demanding the exclusion of China and controls on technology exports to China alone have significant ripple effects on the Korean economy. Securing new markets is an urgent task for Korea. By participating in the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership), which frees us from rules of origin, we can create new value chains and diversify import sources, thereby strengthening economic security."

On the 3rd, the Korea Institute for International Economic Policy released a report titled 'Changes in the International Economic Order After the Pandemic and War and Our Response' (by Kim Kyung-soo, Kim Hong-gi, Song Chi-young), emphasizing that for the Korean economy to survive in the new Cold War era, it must enhance its economic security capabilities and, above all, establish a dedicated economic security organization.

Economic security refers to the ability to protect a nation's economic interests and create favorable economic conditions when events that threaten or disrupt national economic interests occur.

Japan established an 'Economic Security Office' in 2021. It set up an economic security research institute under it and plans to place it under the jurisdiction of the National Security Secretariat. This office is expected to oversee and direct economic security tasks across all Japanese government ministries. In the U.S., the White House National Economic Council (NEC) serves as the national economic command center.

The author, Kim Kyung-soo, Honorary Professor at Sungkyunkwan University and former president of the Korean Economic Association, suggested, "We should move in a direction similar to the U.S. that fits the characteristics of our presidential system. Establishing an economic security organization within the presidential office to oversee economic security functions is a practical alternative."

For example, this organization could take charge of advancing the foreign exchange system. Korea’s foreign exchange system is more outdated than those of other advanced countries, making it highly vulnerable to significant economic losses due to U.S. monetary policy. Foreign exchange policy is crucial as foreign reserves are the means to absorb such external shocks.

Professor Kim advised, "If an economic security organization is established, Korea could participate in the liquidity swap lines created by the U.S. Federal Reserve in 2013 with five central banks, or at least secure support for advancing the foreign exchange system. We must create an economic security organization to steer changes in the international economic environment to our advantage."

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