To Prevent a 'Second Element Shortage,' We Must Penetrate Information and Logistics Flows

18th 4th Economic Security Diplomacy Forum
Inevitable High Price Competitiveness Dependence on China
Government Must Grasp Information and Logistics Flows
Diversification Needed at Overseas Diplomatic Missions Level
Far-Right Party Rapid Rise... 'Super Election Year'
Strengthening Voter Populist Policy Orientation

On the morning of the 4th, a notice reading "We inform you that the sale of urea water is suspended indefinitely" was posted on the exterior wall of a urea water manufacturing company in Bucheon-si, Gyeonggi-do, amid the shortage of urea water caused by China. The company explained that it can no longer sell urea water because it cannot import the raw materials for manufacturing urea water. November 4, 2021 Photo (Source=Yonhap News)

Earlier this month, concerns about a 'second urea shortage' grew due to the delay in customs clearance for urea solution exports from South Korea by Chinese authorities. In response, there has been a diagnosis that a structural solution at the government level is necessary. From the perspective of companies, purchasing Chinese-made urea products with high price competitiveness is inevitable, so they can only respond in the short term. Therefore, efforts to diversify risks on the government side are essential. In fact, as of January to October this year, the proportion of urea imports from China reached 91%. This is 20 percentage points higher than during the 'urea crisis' triggered by China's export restrictions in 2021 (71%).

Such remarks were made at the 4th Economic Security Forum held on the 18th at the Four Seasons Hotel Seoul, hosted by the Ministry of Foreign Affairs' Economic Security Diplomacy Center under the theme of 'Supply Chain Resilience and Public-Private Cooperation.' Professor Song Sang-hwa of Incheon University's Graduate School of Northeast Asian Logistics, who participated as a panelist, said, “Companies have no choice but to act short-term to secure competitiveness today, making risk management difficult,” adding, “Even if they open other supply sources, they may face difficulties due to the lack of logistics and infrastructure.” He explained, “Although urea accounts for a small proportion of the entire supply chain, it can have a significant impact on the industry as a whole by halting fertilizer production and immobilizing diesel vehicles, thereby stopping logistics,” and emphasized, “The Ministry of Foreign Affairs and other government bodies should monitor changes in the supply chain landscape by tracking the flow of information and logistics to prepare accordingly.”

Kim Hyung-joo, Senior Research Fellow at LG Economic Research Institute and chair of the session, also stressed, “If there is a market failure regarding urea, the government and companies need to respond together,” and added, “Economic security should be viewed not only as a benefit for companies but as contributing to the welfare of society as a whole.”

Chair and panelists of the 2nd session attending the "4th Economic Security Diplomacy Forum" hosted by the Ministry of Foreign Affairs Economic Security Diplomacy Center. (From left) Kim Hyung-joo, Senior Research Fellow at LG Economic Research Institute; Park Tae-seo, Executive Vice President of Korea Battery Industry Association; Cho Sung-dae, Director of Trade Support Center at Korea International Trade Association; Song Sang-hwa, Professor at Graduate School of Northeast Asian Logistics, Incheon National University; Lee Hyun-jin, Senior Researcher at Overseas Economic Research Institute, Korea Eximbank.

Diplomatic missions abroad could take the lead in setting up negotiation platforms and diversifying supply chains. Park Tae-sung, Executive Vice President of the Korea Battery Industry Association, said, “We have closely consulted with key urea-producing countries such as Indonesia and negotiated with state-owned enterprises, supporting contracts to secure 10,000 tons of urea at the diplomatic level,” adding, “While supply chains are essentially a corporate issue, diplomatic missions can establish strategies before the private sector steps in.”

In the final session titled ‘Political and Economic Situations in the U.S., China, and Europe and South Korea’s Economic Security,’ it was observed that supply chain policies centered on domestic interests to win voter support will strengthen depending on next year’s elections and political schedules. Attention should also be paid to the variable of the rapid rise of far-right and right-wing parties in various countries. Professor Ha Sang-eung of Sogang University’s Department of Political Science and International Relations said, “Since Trump’s election, there has been a clear linkage between election campaigns and foreign policy,” and added, “For Biden to win re-election, he needs to secure the support of white working-class voters in battleground states, so an economic diplomacy strategy focused on economic stimulus is likely to emerge.”

Jang Young-wook, head of the Europe team at the Korea Institute for International Economic Policy, noted, “The Netherlands’ largest party has become a far-right party, and right-wing parties are rapidly rising in France, creating disagreements over climate neutrality goals and other issues.” He also mentioned that variables such as the upcoming European Parliament elections since 2019 and discussions on EU enlargement involving Ukraine and Moldova should be monitored. Jang said, “Economic ministries need strategies on how to differentiate policies and position themselves as middle powers amid the U.S., China, and EU strengthening regional businesses.”

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