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| Small retailers opposing the joint project by Eugene Corp. and U.S.-based Ace Hardware to open a store in Seoul protest at the SME Ministry in Daejeon in this March 27 file photo. / Korea Times file |
By Yoon Ja-young
The government's policy to protect small businesses and merchants is facing a protest by foreign companies, triggering concerns that it may lead to a trade dispute as they may take the issue to the World Trade Organization (WTO).
According to the U.S. embassy in Seoul, it received a letter from Ace Hardware, a U.S.-based hardware retailer, appealing against the government's decision over its plan to open a store in Seoul.
"We are trying to arrange a meeting between Eugene Corp., which represents Ace Hardware here, and the Ministry of Trade," a spokesperson for the U.S. embassy said.
The U.S. retailer has been preparing to open a DIY construction material and hardware shop, Ace Home Center in Geumcheon District in southwestern Seoul, jointly with Eugene Corporation ready-mix concrete. The construction of the store was completed, and it was scheduled to open in March.
While Eugene and Ace Hardware said the huge shop will create up to 500 new jobs and open up new markets for 325 suppliers, it met severe protest by merchants from Siheung hardware shopping arcade nearby. They said that the 3,700 stores in the arcade, 2.6 kilometers from the Ace Home Center, will be damaged, leaving hundreds of them jobless.
The cooperative of the small retailers requested a business mediation by the SME Ministry. The country has adopted business mediation to protect SMEs from threats by large corporations acquiring, starting or expanding their businesses. Following analysis about whether they will really be damaged, the ministry can recommend large businesses delay their plans for up to 6 years or reduce the scale of their businesses. Penalties will follow if the large company doesn't abide by the recommendation.
The SME Ministry came up with its decision in March, recommending Eugene and Ace Hardware delay the opening of the store for three years. Since it can recommend a delay for another three years, they will likely have to leave the store shuttered for up to six years.
While the SME Ministry determined that the store will damage small merchants nearby, Eugene filed suit against the decision at the Seoul Administrative Court. Starting with the shop in Geumcheon District, the Eugene Group was planning to establish 20 Ace Home Centers around the country over the next five years. It expected between 600 million and 1 billion won in monthly sales at the Geumcheon store. Ace Hardware also sent a letter to the U.S. embassy, complaining that the ministry's decision is violating international rules as well as the principle of equitable treatment with other global retailers.
It also noted that it never had this kind of experience in doing business in more than 60 countries so far. The complaint is thus triggering concerns that the country's protective measures for small businesses and merchants may become a trade dispute issue as they may file a complaint with the WTO.
"We haven't been contacted (by Eugene or Ace Hardware) regarding the issue yet. We will be looking into the matter after they raise the issue regarding trade," an official at the trade ministry said.
