One of the key features of the Presidential Transition Committee’s governmental organization restructuring blueprint is to carve out the trade function of the Ministry of Foreign Affairs and Trade and assign it to the new Ministry of Industry, Trade and Energy (currently, the Ministry of Knowledge Economy). The rationale mentioned by a committee member was the synergy effect expected from the combination of industrial policy and trade policy, so that Seoul’s trade agreement negotiations and implementations can be more streamlined and coordinated. Since the plan was released on Jan. 15, debate has been ongoing as to whether the proposal makes sense considering the
circumstances of Korea in January 2013. Our trade partners must have been quite surprised as well. All of a sudden, their counterparts are about to change overnight. Policies and stances on key outstanding issues may also be affected by this abrupt change.
Many trade watchers find this proposed change rather counter-intuitive. Over the past decade, trade issues have become more complex and broader, going beyond mere industrial policies. Consider the Korea-U.S. FTA, the most recent trade topic that galvanized heated national discussions on the trade policy. The industrial policy portion of the agreement takes up less than 25 percent of the total agreement. As vividly remembered by us in Seoul, controversies surrounding the agreement were mainly centered on issues like beef imports, environment, labor, investment disputes and service market opening. Remember also the G20 Meeting in November 2010, one of the most recent international events that Korea organized in the area of international trade. The topics discussed there ― such as currency depreciation and its relevance to protectionist measures ― were all outside the traditional mold of industrial policies. In short, the trade issues have evolved to a “digital era.”
One would find it odd for the Transition Team to refer to the need for industrial policy coordination as the sole basis for the proposed change. It may have been a good model in the 1980s and 1990s when industrial policy made up the bulk of the trade concern.
In the meantime, as demonstrated by the conclusion of FTAs with various key partners and the subsequent market liberalization of these countries, Korea’s sometimes aggressive trade strategy has apparently produced tangible results. More than a few countries are said to be interested in Korea’s trade policy and strategy so as to benchmark them for their own use. Certainly, there are issues that may have been or should have been more thoroughly addressed to avoid domestic controversies, but it is questionable whether individual instances of controversies can rise to the level of eliminating this tangible outcome ― just let the numbers talk. This is another reason why more compelling reasons should be offered to build consensus on why Korea should go back to the pre-1998 formula in terms of trade function.
In light of this, the proposed change is not a mere turf war between the two ministries. Rather, it may offer an unintended signal for future trade policies of Korea. Or, it may cause long-term impacts on the trade policy formulation and trade agreement implementation of Seoul. So, this is a more significant issue than it may seem on its surface.
A trade diplomat stationed in a foreign embassy in Seoul that I met the other day quipped that it was quite interesting and perplexing to watch the recent development. He added that they were watching closely the development because, again, the proposed change may overhaul the mechanics of the trade negotiations and discussions. It is absolutely true that sometimes changes and adjustments of governmental structure are necessary. But such a change should be based on in-depth and thorough discussions of all the pluses and minuses. Otherwise, we will be hearing yet more talk of changes ― this time back to the Foreign Ministry ― in five years. Canada broke up its Foreign and Trade Ministry in 2003 on similar grounds, but reversed the decision and combined the two again only three years later.
By Lee Jae-min
Lee Jae-min is a professor of law at the School of Law, Hanyang University, in Seoul. Formerly he practiced law as an associate attorney with Willkie Farr & Gallagher LLP. ― Ed.