|Sohn Sung-won, professor of economics at Loyola Marymount University / Korea Times file|
Seoul urged to have 'consistent policy' toward Tokyo
This is the third in a series of interviews with global economists to see how the ongoing trade disputes will unfold and to analyze their implications for the Korean economy ― ED.
By Kim Bo-eun
A noted global economist has called on the Korean government to come up with a long-term strategy to handle an ongoing trade feud with Japan calling it an "emotional and political issue," not just a trade issue. He stressed that because of the nature of the conflict between Tokyo and Seoul, Korea should see it as emotional and political problem and take a more careful and thought-out approach to find a fundamental solution.
"The Korea-Japan discord is more difficult to solve than the U.S.-China issue. It is not really a trade issue. It is more of an emotional and political issue, making it much more difficult to find a solution," Sohn Sung-won, professor of economics at Loyola Marymount University, said in an email interview with The Korea Times.
"It is time for Korea to sit back and contemplate what went wrong and why. The country needs a long-term strategic plan on political, economic and diplomatic issues."
Sohn, who was a senior economist at the White House under the Richard Nixon Administration, attributed the current conflict with Japan to Korea's lack of a consistent policy toward its neighbor.
"Outsiders have complained that Korea's policies change too drastically with each new administration. There should be more continuity," Sohn said.
Sohn's remarks came after Tokyo imposed export restrictions on Seoul including exclusion of the latter from its whitelist of countries receiving favorable treatment in export approval processes.
This is seen as a response to top court rulings in Korea last year that ordered Japanese companies to compensate surviving South Korean victims of wartime forced labor under Japan's 1910-1945 colonial rule. Previous administrations let the trials continue for years, as they put them in a difficult position with Japan.
Tokyo is also irked by Seoul taking issue with a deal on wartime sex slavery made in 2015. The pact was made under the conservative Park Geun-hye administration, but the incumbent liberal Moon Jae-in administration discarded the deal, based the fact the deal was made without reflecting the opinions of victims.
The veteran economist said that the need for such a long-term plan to deal with Japan is especially necessary since it appears Korea will continue to be hit by the deepening trade war between the U.S. and China.
"China has decided that it is too difficult to deal with President Trump. Any goodwill between China and the U.S. has been shattered. There is a strong possibility that this trade war will escalate spilling over into currency wars," Sohn said.
"The economies of the two countries and other trading nations including Korea will be adversely affected."
GDP growth may fall below 2%
He stressed that while a third-party feud may be out of Seoul's control, it needs to develop a consistent, long-term approach.
"Korea is experiencing problems on all fronts including political, economic and diplomatic. Two of Korea's largest trading partners are experiencing economic slowdown and Japan is hostile toward Korea," Sohn said.
"There are no good short-term fixes for Korea's problems," he noted.
He said the situation is particularly dire because monetary and fiscal policies can do little to ease circumstances.
"As the trade issues depress exports and economic activities, what monetary and fiscal policymakers can do to support their economies is very limited. In the U.S., for example, interest rates are already low enough and there is plenty of liquidity. Cutting the interest rate won't help the economy much," he said.
And as exports and economic activities in Korea shrink accordingly, flight of foreign capital is ongoing and may likely continue.
"Flight to safety is a normal phenomenon as uncertainty grows," Sohn said.
With all of these factors weighing in, the economist forecast "Korea's economic growth in 2019 will fall below 2.0 percent and 2020 does not look better: it could get worse."