Moon faces economic challenges over U.S. protectionism

SEOUL-- Moon Jae-in appears likely to face a series of economic challenges as South Korea's president as the United States and China flex their economic muscles, experts here said Wednesday.

Although all the votes from the presidential elections have not been fully counted, the former lawyer has all but won the race. He will inherit Asia's fourth-largest economy that has been showing some modest signs of recovery, as improved global economic conditions have helped the country's exports and investment.

Still, there is no time for complacency, experts stressed.

Moon is likely to face a reality check soon as the euphoria that greeted his victory begins to fade amid growing U.S. protectionism and China's thinly veiled economic retaliation.

"The biggest problem could be the U.S. stance of protectionism," said Song Kyung-jin, president of the Institute for Global Economics, a private think tank in Seoul.

U.S. President Donald Trump has advocated protectionist policies, a move that set off alarm bells in South Korea that has long been dependent on exports to fuel its economy. South Korea's exports account for about half of its gross domestic product.

South Korea, Japan and China vowed to fight against "all forms of protectionism" during their recent meeting of senior financial officials and central bankers of the three neighbors in Japan.

South Korea is also concerned about possible U.S. demand to renegotiate the bilateral free trade deal.

The free trade deal -- which went into effect in 2012 -- has widely been considered a symbol of the economic alliance between the two countries.

During the campaign, Trump has denounced the free trade pact with South Korea as a "disaster" and a "job killing" deal.

"South Korea could face the U.S. pressure of renegotiation of the free trade deal and designation as a currency manipulator," said Choi Un-sun, a fixed-income analyst at Cape Investment & Securities Co.

The U.S. did not label South Korea a currency manipulator last month, though it put Seoul on its "monitoring list" for closer watch of its currency practices, along with China, Japan and three other countries.

Choi said South Korea could face pressure from the U.S. to buy U.S. shale gas to reduce Seoul's current account surplus against the world's biggest economy.

South Korea posted US$28 billion in goods surplus with the U.S. last year, with its current account surplus accounting for 7 percent of the country's gross domestic product.

South Korea has said it will import U.S. shale gas in earnest, with the first batch of 2.8 million tons set for this year, while it will consider expanding imports of U.S. products like aircraft and various industrial components.

Choi also said South Korea's won could gain strength against the dollar, which could make its products more expensive in overseas markets and undermine its competitiveness.

Adding to the woes, China has stepped up restrictions on South Korean goods in recent months over the ongoing deployment of an advanced U.S. missile defense system.

Moon has said it is regrettable that China has taken retaliatory measures, which he said have gone way beyond the norm.

Seoul and Washington began to deploy the U.S. missile shield in South Korea to counter North Korea's evolving nuclear and missile threats.

Still, China has repeatedly pressed South Korea and the U.S. to cancel the deployment and withdraw the missile defense system, claiming it could hurt China's security interests.

Moon has lashed out at unconditional consent to the U.S. missile system, which he claims cost Seoul's diplomatic cards and leverage. The decision was made by former President Park Geun-hye, who was impeached and ousted from office over a corruption scandal.

Moon has promised to strengthen trade diplomacy to counter protectionism, but questions remain unanswered on how to translate his rhetoric into action.

"It is critical for South Korea to diversify its goods and trading partners," Song said, citing the lesson of China's recent economic retaliation.

The U.S. and China -- the world's largest and second-largest economies, respectively -- account for about 40 percent of South Korea's exports.

Source: Yonhap News Agency

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