No need for Seoul to prematurely wary of Trump-led trade war

U.S. President Donald Trump signed on Monday an executive order in a bold move to pull the United States out of the Trans-Pacific Partnership, just one day after announcing his decision to renegotiate the North America Free Trade Agreement. He made the move at the pretext of benefiting American workers. As it has become clear that world order centered on free trade that was spearheaded by the U.S. is shifting to an era of protectionist, bilateral trade agreements in line with Trump’s "America First" doctrine, chances are high that Washington will place its conventional economic and political alliances on the table anew to seek renegotiation.

Above all, Mexico had to see its peso currency plunge as much as 20 percent in value, and its stock market tumble by 6 percent. Korean conglomerates as exporters that have built factories in Mexico primarily to benefit from NAFTA are in a state of emergency. Korea is not exposed to direct impact from Washington’s withdrawal of TPP, which is joined by 12 countries including Japan and Singapore, because Seoul did not sign up in the pact. However, since Trump is taking extremely hardline measures, chances are high that Washington will demand renegotiations of the Korea-U.S. free trade pact as well. Following TPP meant to keep China at bay in the Asia-Pacific region that is poised to collapse, the Korea-U.S. free trade agreement, which effectively served as an economic alliance between Seoul and Washington, is also on shaky ground, which could spark geopolitical shift, and hence Korea urgently need to make preparations on many fronts.

Despite the unfolding of prelude to a global trade war set off by Trump, it remains to be seen whether Trump’s bid will actually bring about as much benefit as Washington anticipates. The very fact that Trump is trumpeting anachronistic protectionism to support the American manufacturing sector that has been shrinking due to industrial revolution and technological paradigm shift is not in the best interest of the nation in the first place. The measure might give a boost to the U.S. economy in the short term, but chances are high it will bring about a slump in trade and economy not only in the U.S. but also around the world in the long-term. For this reason, China, which is striving to take over hegemony from the U.S., showed a grim smile of satisfaction over Washington's latest move.

Korea once held additional negotiations over the Korea-U.S. trade accord in automobile and pharmaceutical sectors in 2009, when the Barack Obama administration called for protection of American industries and jobs. Korea must prepare a response strategy under diverse scenarios and ensure that Washington understands that the Korea-U.S. FTA also serves to create jobs in the U.S. as well. While the U.S. is concentrating on revival of its traditional manufacturing industries, if Korea can use such move as an opportunity to further advance its industrial structure, it may offer Korea a steppingstone to take a new leap forward. If Japan, which was spearheading TPP, suffers a setback, Korea that is competing with Japan in the U.S. market may stand to benefit. Amid uncertainties, the only measure that will enable Korea to create new paths of export is to increase the competitiveness of its companies. Entrepreneurship is more critical now than ever before in order to enable companies to grasp changes in the global market and make bold moves.