#USA #Washington #US Economy #Korea #Competere Foundation

Korea's Discriminatory Competition Policies: Economic Risk for Both Nations

Recent research from the Competere Foundation has brought to light the potential economic fallout stemming from South Korea's competition policies targeting U.S. companies. Over the next decade, these policies could result in nearly $1 trillion in losses for both economies, with the United States expected to bear the brunt of this impact.

The estimated loss for U.S. firms hovers around $525 billion. The difficulties arise from various regulations implemented by the Korea Fair Trade Commission (KFTC), which many claim unfairly hinder American firms ranging from tech giants like Apple and Google to online retail platforms such as Coupang. These American companies provide critical services—ranging from online retail to social media—and restrictions on their operations could curtail their market reach in Korea.

The root of these issues lies in what officials describe as a need to ensure fairness for local businesses. The KFTC’s rigorous enforcement of regulations to curb perceived advantages held by U.S. companies has stunted foreign investment and bred a climate of distrust. This regulatory environment is described as an attempt to control which companies succeed in the marketplace, thereby diminishing competition.

For the average American household, these conditions are projected to yield economic losses of about $3,800 each over the decade, according to the Competere research. In a reciprocal manner, South Korea’s economy stands to lose approximately $469 billion. This loss disproportionately affects micro, small, and medium enterprises (MSMEs) in Korea, which will be sidelined by regulations that deter foreign investment, further embedding economic inequities.

The KFTC has pushed various legislative efforts, including the Fairness in Online Brokerage Transaction Act and the Online Platform Monopoly Act, which enforce a heavy regulatory burden specifically on larger American businesses. Instead of promoting a competitive marketplace, these policies limit consumer choice and inflate costs.

Other regions within the Asia Pacific could also incur economic repercussions stemming from South Korea’s regulatory stance. The Information Technology and Innovation Foundation reports that smaller businesses—typically operating with fewer resources—benefit significantly from the support of U.S. tech firms to access global markets, streamline operations, and enhance customer engagement.

Negative impacts of increasing regulation, particularly on digital platforms, could bring compliance costs exceeding $3 billion annually across the APEC region, with South Korea accounting for nearly $512 million of this burden. Alarmingly, MSMEs could shoulder approximately 70% of these compliance costs, compromising the growth potential of the Asia Pacific economies.

Ed Ratcliffe, Executive Director at the Southeast Asia Public Policy Institute (SEAPPI), argues that overly stringent regulations could counteract the objectives they intend to achieve, ultimately stymying growth for the very businesses they seek to protect.

Yet, the Competere Foundation highlights a path forward for both nations. By addressing U.S. concerns regarding the KFTC’s disproportionate targeting of American firms, Korea can open a dialogue to amend harmful laws and foster a fair competitive environment that serves both Korean businesses and foreign investors alike.

This urgency for reform was underscored by Shanker Singham, President of the Competere Foundation, who pointed out that if reforms are not undertaken swiftly, both economies face significant losses. As the Korean government navigates its regulatory landscape, a shift from protectionist policies could lead to a revitalization of foreign investment and improve economic relations between the United States and Korea.

In conclusion, proactive measures aiming to dismantle discriminatory trade practices can avert a potential economic crisis and pave the way for mutual growth, making this a win-win scenario for both nations. For further insight into the implications of these policies and comprehensive details from the full Competere study, interested parties can access the original research through the foundation's publications.