South Korea’s trade minister says supply chain resilience must be post-pandemic goal
The coronavirus pandemic has forced a “fundamental shift” in global trade policies as governments increasingly focus on supply chain resilience and securing access to next-generation technologies, according to the South Korean Minister of Commerce.
Yeo Han-koo told the Financial Times in an interview that the traditional focus on market access and supply chain efficiency was seen as insufficient.
“The scope of the trade policy that we had before the pandemic – essentially the opening of the market for trade in goods and services, rules of origin, etc. – is not the trade policy that we are witnessing in this new era, ”Yeo said.
“Digitization, vulnerability of the supply chain and development of the rules of the road for emerging technologies: these are the new challenges. “
Yeo cited a severe shortage of diesel exhaust fluid in November as an example of a supply chain shock that rocked policymakers.
South Korea depends on China for over 97% of its DEF imports. But after Beijing restricted exports of urea, a key ingredient in DEF used to reduce toxic emissions from diesel engines, the country’s logistics sector faced looming paralysis. The South Korean military has been forced to airlift tens of thousands of liters of fluid from Australia, Southeast Asia and the Middle East.
“It wasn’t even a high-tech product, but we woke up one morning to realize that we were only relying on one country. We need early warning systems to prevent these situations from turning into something serious, ”Yeo said.
South Korea is the world’s eighth largest exporter of goods and services, according to the World Bank. The boom in the chip, car and ship trade is boosting the country’s economic recovery from the Covid crisis, with exports and trade volume set to hit record levels this year.
Asia’s fourth-largest economy announced this month that it was preparing to apply to join the Comprehensive and Progressive Agreement on Trans-Pacific Partnership, after China’s attempt to enter the regional trade pact appeased Seoul’s fears of upsetting its biggest trading partner.
But it’s unclear how Seoul’s official candidacy, which is expected to be submitted before President Moon Jae-in’s term ends in May, will be received in Japan.
The countries are embroiled in a dispute at the World Trade Organization over the export controls Tokyo imposed on South Korean semiconductor components in 2019 linked to a fight against Japan’s occupation of Korea in time of war. All CPTTP members must approve any new entry into the pact.
Yeo admitted that “we haven’t really had a chance to have in-depth conversations,” but insisted that the responsibility for improving relations lies entirely with Tokyo.
“It was Japan that imposed these export controls, and since then Korea has rectified any issues that Japan has raised,” he said. “So it’s Japan’s turn to present a more positive and constructive position and see how we might resolve this issue.”
Separately, Yeo insisted that Seoul would “not take sides” in the dispute between the United States and China.
“The previous balance in US-China relations has been upset, so now everyone is readjusting to find a new balance,” Yeo said.
South Korea and like-minded governments “do not want this conflict to lead to more serious chaos in the world economy,” he added.
“It’s not just Korea. Many countries in the region are facing a similar situation.
Seoul has worked closely with the Biden administration to make Washington’s priorities a reality in areas such as electric vehicles and semiconductors.
Yeo praised Katherine Tai, the US Trade Representative, for her intervention to negotiate a settlement to end a bitter dispute between the battery manufacturing subsidiaries of Korean companies SK and LG.
The disagreement threatened the future of SK’s $ 2.6 billion battery plant in the U.S. state of Georgia, and plans by Ford and Volkswagen to build electric vehicles in America.
“Katherine Tai’s intervention saved thousands of jobs and the US-Korea electric vehicle battery supply chain,” Yeo said. “It was an example of what active trade authorities can do.”
But he admitted that South Korean chipmakers had been confused by US requests for details on chip supply and demand, inventory and different customer segments.
“Businesses will fear that this type of information will reveal sensitive information related to their consumers and their trade secrets,” he said. “We have expressed our concern and the United States has indicated that it understands this concern.”
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