Bush Trade Bid Meets S. Korean Skepticism

AS President Bush pushes for greater economic concessions from South Korea during his three-day visit there, his Seoul hosts calculate the costs.

Korean government economists worry that opening the country's markets and lifting business subsidies could derail its economic locomotive, now driven by strong domestic consumption and exports. Given the distinct possibility of unification with North Korea, Seoul's priority is its own financial strength.

"Our economic might is not as strong as Germany's," said Hong-Choo Hyun, South Korea's Ambassador to Washington, shortly before his departure to Seoul to meet with Bush and American business leaders. The ambassador said his country's "small economy" must grow quickly if it is to bear the future burden of financing North Korea's development. A recently published, government-commissioned Korean Development Institute report estimates a staggering $400 billion price tag for unification of the Korean Peninsul a. Michael Mazaar, a fellow at Washington's Center for Strategic and International Studies, says the US officially supports the notion of unification, but not at the cost of allowing Korea to maintain market barriers to United States goods and businesses or allowing cheap Korean products to flood US markets.

The US is South Korea's single largest export market for shoes, electronics, and automobiles. Washington took Seoul to task in the latter 1980s for employing unfair trade practices such as barring US goods and manipulating exchange rates to make Korean goods cost less in Korea and abroad.

"Korea has done a lot to improve the situation during the past two years," says Nancy Adams, deputy assistant secretary for Korea at the US Trade Representative's office. US Department of Commerce estimates show that the trade deficit with Seoul narrowed from $9 billion in 1988 to $1 billion in 1991. Seoul claims its own 1991 $1 billion trade deficit with the US.

Ambassador Hyun concedes that South Korea benefits from "the open US market." He says Korea has redressed the trade imbalance by importing a bit more from and exporting a lot less to the US. Korea is the third-largest importer of US grain and buys big-ticket American items such as machinery and aircraft. But Hyun says his government would be hard-pressed to do much more.

Seoul's stated need for strong growth policies so that its 21 million people can afford the huge costs of 42 million North Koreans "is just another line from Seoul," says Mazaar. "It's a modification of an earlier line: 'We're just a developing country.' It won't persuade Bush or Congress."

Korea has developed with headlong speed since the early 1960s. Its gross national product grew by 12 percent, annually, during the 1980s. Seoul's economic planners are worried that the gross national product (GNP) will slide below 1990's estimated 9 percent growth. Korean industry's international competitiveness problems are the cause of "the economic slowdown," according to Korean government economic reports. Frustrated US producers of steel and microwave products complain that Korean concern about econ omic dynamism translates into continued unfair trade practices.

But South Koreans "know their future is in trade," says USTR's Ms. Adams, "They feel we're pushing them too fast on liberalization. We have to get them away from the piecemeal, product-by-product, issue-by-issue approach toward negotiations." The US seeks more comprehensive improvements in market conditions for American firms and products in South Korea.

Korea watchers say Seoul wants to buy time on two fronts: First, by trying to defer liberalizing its markets until its industrial and agricultural base develops to meet challenges from foreign competition. Second, it seeks to delay unification with North Korea until its northern neighbor has financed development with Japanese and Western investments and loans.