[Insight & Opinion] The New Globalization in the Era of Deglobalization

[Asia Economy] In 1944, representatives from 44 countries gathered in Bretton Woods, USA, witnessed an astonishing situation. Instead of deploying large-scale troops in Europe to collect war reparations after investing enormous costs to lead the war to victory, the United States decided to open its market. By lowering tariffs, the dollar, exchangeable for gold, was established as the foundation of international currency, and each country's currency was linked to it to stabilize exchange rates. This integration and connection of the capitalist world, initiated based on the United States and the dollar, led to victory in the Cold War and subsequently resulted in global integration and prosperity for 30 years.

However, as everyone is witnessing, the United States, which created this system, is now trying to change the existing framework. The principle of a free market that minimizes state intervention has been weakened as aggressive national industrial policies symbolized by subsidies are pursued. The free flow of technology and information, which moved freely according to market principles, is also becoming subject to control. Other countries are adopting or strengthening similar approaches in response to the U.S. attempts to foster advanced manufacturing and create jobs by exchanging their markets and investments.

In this situation, the Republic of Korea is facing a crisis. Over the past decades, Korea has grown continuously by procuring the cheapest raw materials and parts in the flow of globalization, building mega production facilities in Korea or China, producing products with very high efficiency, and selling them globally. When production costs such as labor costs rise, efforts have been made to maintain a balance between overseas and domestic production by shifting to high value-added products and relocating existing processes overseas, which has steadily maintained the domestic manufacturing base. The result is a manufacturing share of 28% relative to GDP, the highest among major countries. Manufacturing has enabled the formation of the middle class and stable social development by providing relatively high and stable wages and jobs. However, this successful formula is increasingly unlikely to work properly under the changed rules of the game.

Companies are more sensitive than anyone else in recognizing and responding to these changes. Large-scale overseas investments centered on the U.S. and European regions are not optional but desperate struggles for survival. In this situation, the government must pay attention and support to heavy and chemical industries, which, like advanced manufacturing industries that all countries strive to attract, must remain domestically. Many key industries, including shipbuilding, are closely linked to specific regions due to locational conditions, and maintaining and developing these industries is a core factor enabling the survival of those regions. Above all, solving the ongoing labor shortage problem is crucial. It is urgent to implement comprehensive changes in foreigner-related policies and systems that go beyond temporarily introducing foreign workers for short-term use, allowing for long-term residence and domestic stay to improve skills and expertise.

The flow of globalization is now coming to an end, but Korea's true globalization may just be beginning. More investment and expansion must be pursued overseas, and domestically, more foreigners must join forces for Korea's prosperity and development.

Choi Jun-young, Specialist, Law Firm Yulchon