Korea threatens washington on trade

Even the mid-90s Washington’s sensitivity on telecommunications extended to allies. Appearing in July 1996 on the Newsbytes international wire service. By Gerry O’Kane.

Like many American trade negotiations, Washinton’s dealings with South Korea over telecoms are getting messy. The Korean government, through spokesmen from various ministries, has warned that it will take the US to the World Trade Organization (WTO) should Washington try to get its own way by imposing tariffs.

The US has held protracted discussions with South Korea about granting national treatment to its telecommunications equipment manufacturers. That bone of contention is a mere precursor to the general push to open Asia’s telecommunications markets to foreign competition.

Korea’s latest statements said this action would only be taken should the US demands become “unreasonable”. The topic could become heated as US companies put the political pressure on.

Trade claims need a closer look

Seoul says it doesn’t want to deal with the issue on a purely bilateral level. It adds that it cannot be expected to legislate and force domestic companies to buy US equipment.

On the other hand, the US does have a valid point. Its own companies were faced with the economic might of the chaebols, forcing the recent auction of new mobile licenses at nearly three times their expected prices. This was done purely to guarantee that the Korean firms captured a hefty chunk of the CDMA (code division multiple access) equipment market. The reality is that the competition in South Korea is unbalanced and that foreign firms have an unusually difficult time selling products there.

But by calling for a multilateral resolution of the dispute, Seoul knows it can expect the backing of other nations wanting to retain protected systems.

Interestingly, as the ministries leaked their polite warnings, the Korean press suddenly began carrying stories claiming that the local telecoms equipment market has been hard hit by the “flood” of US imports. The news was attributed to “sources.”

According to statistics from the Information and Communications Ministry and the Customs Department, the first five months of the year saw imports jump by 20% and exports decrease by 50%.

US dominates CDMA handset market

What the stories failed to report was that the massive recorded increase in equipment imports (which included sales of personal computers) was largely due to a 66% rise in sales of personal phones over the past year. This can be attributed to the roughly 150,000 CDMA cellular subscribers who have come online in the past six months, given US domination of the CDMA handset market.

Korea’s own manufacturers had earlier admitted they were having manufacturing problems and that US products had to be imported to meet demand.

The stories also claimed this flood of imports accounted for Korea’s trade deficit with the United States of US$402 million, up 80.7%. But they failed to point out that DRAM semiconductor sales have plummeted over the same period, and that this sector makes up over 15% of the nation’s total exports.

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