South Korean media: [Editorial] Tariff war is a global industrial war, what is South Korea doing?
As soon as the news of the sudden agreement in the South Korea-US tariff negotiations came out, the auto and shipbuilding stocks in the South Korean stock market quickly surged. Economic groups also unanimously welcomed it, saying that they avoided the worst outcome and eliminated uncertainty. It was fortunate to resolve the urgent issue, but it's not yet time to be complacent.
Global countries are competing to "attract investment" to foster their own industries. The core topic of the APEC Business Leaders Summit was also "supply chain restructuring in the AI era." The United States is moving global factories into its own country through the Inflation Reduction Act (IRA) and the Chips Act (semiconductor act). One of the purposes of Trump's tariffs was also to attract investment. Japan has invested tens of billions of dollars in building SMRs (small modular reactors), AI infrastructure, and acquiring key minerals, beginning to revive its manufacturing industry. As a result, in 2021 alone, the US brought back 1,800 companies, while Japan has introduced about 600 companies per year in recent years.
So what is the reality in South Korea? Rather than talking about "attracting investment," it's currently the time for "companies to flee." In just the first half of this year, 2,437 South Korean companies made overseas direct investments, an increase of more than 63% compared to the same period last year. On the contrary, only five "returning companies" returned to South Korea in the first half of the year. The number of companies leaving is more than 480 times that of returning companies. In 2014, the South Korean government even enacted the "Act on Support for Returning Enterprises," but in 12 years, only 200 enterprises have returned to South Korea. In 2021, there were 26 returning enterprises, but by January-September this year, it had shrunk to 11. In the front lines of small and medium-sized enterprises, voices of "just wanting to close down" are rampant. In this context, the tariff war initiated by Trump will only accelerate the relocation of South Korean companies overseas.
The reasons for South Korean companies to leave are numerous, but the reasons to stay are nowhere to be found. When competitor countries offer tax incentives and relax regulations to "lay out the red carpet" for enterprises, South Korea instead chokes enterprises with violent unions, support for the ruling party, an extremely rigid labor market, excessive criminal penalties (such as the Major Disaster Punishment Act), and high tax burdens.
The agreement on the tariff negotiation is merely the beginning of the problem. If fundamental solutions are not provided and a quality business environment is not created, one day South Korea's industry will be left with only an empty shell. The government must improve the competitiveness of South Korean enterprises through extraordinary regulatory reforms and labor reforms, as well as decisive tax support. Once South Korea becomes a quality business environment, foreign enterprises will naturally flock in. Employment will increase, young people will have hope, and birth rates will rise. May the government that completed the tariff negotiation can use this momentum to promote a virtuous cycle in South Korea's industry.
Source: Chosun Ilbo
Original: www.toutiao.com/article/1847518930990090/
Statement: This article represents the views of the author.