Expand economic partnership
: Korea, U.S. should advocate for free trade
President-elect Joe Biden is expected to bring great changes to U.S. economic policies when he occupies the White House in January. Biden will try to make good on his promise to revive the multilateral global trade order shattered by President Donald Trump's unilateralism and protectionism. First of all, he should put the World Trade Organization (WTO) back on track and expand relations with major trading partners.
With two months left before Biden takes office, we urge the President Moon Jae-in administration to fully prepare for the incoming era of President Biden and his "Bidenomics" which has already taken shape. Biden is likely to respect the WTO rules, a boon for the economy of export-oriented South Korea. The Trump administration has been attempting to hamstring the WTO, claiming it has curried favor with China with slight consideration of U.S. interests.
Biden earlier announced a plan to release more than US$3 trillion to simulate the batted economy, which will stoke domestic demand in the U.S. This will be an opportunity for South Korean exporters. According to the Hyundai Economic Research Institute, a 1 percent growth in the U.S. economy will help increase Korean exports by 2.1 percent and ramp up Korea's gross domestic product (GDP) growth by 0.4 percentage points.
Biden is also likely to revitalize the Trans-Pacific Partnership (TPP) pushed by former President Barack Obama, to counterbalance China's growing economic influence in the Asia-Pacific region and beyond. The TPP was sealed in 2015 and took effect in December 2018 in the absence of the U.S. after the Trump administration withdrew from the trade agreement. Seoul has also stayed away from it, but may join it once the U.S. does so.
The new U.S. president will likely adopt a package of environment protection measures, returning the U.S. to the 2015 Paris Climate Accord. These policies will provide opportunities for Korean carmakers such as Hyundai Motor and Kia Motors to increase their production of electric vehicles and hydrogen fuel-cell automobiles. Hyundai and Kia have assembly lines in Alabama and Georgia, respectively. Yet, the domestic carmakers may have to shoulder additional labor costs in the U.S. because Biden has vowed to raise the minimum wage to $15 per hour from the current $7.25.
South Korean battery makers -- LG Chem and SK Innovation -- and solar panel producers including Hanwha Solutions can also benefit from Biden's environment-friendly policies. LG Chem has a line in Michigan and has begun constructing a second one in Ohio, while SK Innovation is building plants in Georgia.
To facilitate cooperation with the incoming Biden administration it is necessary for the Moon administration to expand dialogue channels with the U.S. It should seek to expand personal diplomacy by making use of noted figures such as former U.N. Secretary-General Ban Ki-moon who maintains close ties with President-elect Biden.
The government and the ruling Democratic Party of Korea (DPK) also need to make bipartisan efforts in cooperation with the main opposition People Power Party (PPP) to strengthen the country's alliance and partnership with the U.S. They also should work together to cope with possible trade pressure from Washington.
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