The United States and South Korea have experienced changes in their relationship throughout recent history. Today, the US is Korea's largest trading partner and is a crucial source of advanced technology. Korea is the sixth largest market for US exports. The Ministry of Trade, Industry and Energy reports approximately 1437 cases of foreign direct investment from the US. The US Department of Commerce designated South Korea as one of the 10 "Big Emerging Markets" indicating that Korea should should be a top choice for exports and investment by American firms. US investors recognize that South Korea is an ideal site for production of "high value-added" goods and marketing. In addition, it provides a gateway to China and Russia. Korea is the third largest consumer of American agricultural products, including corn, soybean, and cotton. The results of these trends all contribute to the fact that Korea-US trade amounted to $50 billion in 1995.
The relationship between the United States and South Korea began as one based on security. The Unites States pledged to provide capital and technology to post-war South Korea as it began to rebuild and to protect it from the threat of communism. In addition it was the major market for South Korea's initial export policy which was marked by import barriers and export subsidies to the private sector.
In the 1980s, the relationship between the United States and South Korea began to change. Korea gained newly industrialized status and maintained a record trade surplus with the US. American investors no longer viewed Korea as developing or uncompetitive, and saw their export policy as a distinct threat. The US took action to defend domestic markets including textiles and steel, implemented quotas and enacted antidumping regulations.
The 1990's have been characterized by reforms in policy to ease any tensions that surfaced in the previous decade. Korea has outlined major reform policies which cover foreign direct investment, intellectual property rights, and trade in services. It is apparent that this nation must work with the US to achieve its goals in each of these area. Some American investors argue that Korea is not committed to these reforms as the country still maintains strict regulations in the automotive market, the approval of telecommunication equipment type, and in the protection of intellectual property rights.
The governments of South Korea and the US have taken significant measures to address the concerns of key industry leaders. The current US policy of the Clinton Administration promotes the protection of domestic industries, the expansion of exports, the deregulation of South Korea's markets, and the liberalization of foreign investment for US firms. To achieve these measures, the US will implement all forms of negotiation capabilities, including unilateral, bilateral, regional, and multilateral agreements. For example, the President's economic initiative and dialogue for economic cooperation on foreign investment was established to broaden trade discussions and to strengthen relations.
In addition to these negotiations, more efforts are being made to create synergy in the high-tech industries, combining US technology with Korean manufacturing. However, both nations recognize that other countries throughout Southeast Asia are becoming attractive alternatives for labor-intensive industries. Therefore a greater emphasis is now placed on the manufacturing of sophisticated goods and high-value, technologically intensive inputs.
The US International Trade Administration (ITA) has outlined industries which will sustain strong growth in the future and thus be lucrative sectors for US businesses. The ITA's list includes consumer-ready farm products, energy, information technology, environmental technology, and infrastructure projects. South Korea is in the midst of constructing 39 electric power plants which will require 10-20 percent of equipment from outside sources. US design and equipment firms have a good reputation in South Korea for manufacturing such equipment. The rapid industrial growth has prompted the government to invested $5 billion on environmental improvements, thus the market for pollution equipment and technology is generating opportunities.
The future of the commercial relationship between the US and South Korea will be characterized by strategic alliances in R&D, production, and marketing. In addition, technological cooperation will play a key role in the sophistication of product inputs. The US-Korean relationship will be one of increased dialogue as the reforms of South Korea are implemented and continue to impact key sectors in the United States. Finally, the relationship will surely be a prosperous one if the goals of the each nation's government and investors are successful.
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