Jeong Ingyo: "Not De-globalization, but a Process of Re-globalization" [De-globalization? New Order!] ③

How Should We Interpret the Current Situation?

Professor Jeong Ingyo from the Department of International Trade at Inha University is being interviewed on the 20th at the Korea Institute for Advancement of Technology in Gangnam-gu, Seoul. Photo by Kang Jinhyung

"We are currently witnessing the formation of a new trade order centered around the United States. Rather than globalization that includes the United States, we are seeing another form of globalization that excludes the United States-in other words, re-globalization is underway."

On August 20, during an interview at a conference room in Gangnam, Seoul, former Ministry of Trade, Industry and Energy Trade Negotiations Head Jeong Ingyo diagnosed the current global trade order as a process of "re-globalization." He explained that while the free trade order between the United States and its counterparties has weakened due to the tariff pressures from the second Trump administration targeting the entire world, free trade among other countries is still functioning and must continue to do so, signifying the ongoing process of re-globalization.

Former Head Jeong oversaw trade policy from January last year until June this year. From the launch of the second Trump administration in January this year until his resignation, he led the initial negotiations with the United States.

He said, "If de-globalization means the end of globalization based on free trade principles-an end to the era of openness-I don't think that's the case. Due to advances in science, technology, transportation, and communications, the era of openness cannot simply end. What we are experiencing now is the process of re-globalization, where a new trade order is being formed centered around the United States and another among the rest of the world."

- Are there any regrets regarding the results of the Korea-U.S. tariff negotiations?

▲Some say, 'Isn't it a good result since Korea's investment amount of 350 billion dollars is less than Japan's 550 billion dollars?' However, we must not overlook the fact that Japan's economy is twice the size of Korea's.

Also, while Korea's trade surplus with the U.S. in 2024 is 66 billion dollars and Japan's is 68.5 billion dollars, which are similar, we should not just look at the numbers for this year. The U.S. reportedly argued, 'Since Korea and Japan have similar surplus amounts, they should invest similar amounts.' At that point, our government should have persuaded the U.S. to look at the past ten years, not just one year. Over the past decade, Korea's trade surplus with the U.S. is only about half of Japan's. Based on this, we are at a much greater disadvantage.

- Japan concluded its tariff negotiations with the U.S. before Korea did. How did this affect Korea?

▲It was Japan that provided the starting point for Korea's 350 billion dollar investment in the U.S. Japan agreed to an unreasonable deal. The U.S. used Japan as a test case to extract the maximum concessions from Korea as well. The European Union agreed to invest 600 billion dollars in the U.S., which is considered a good outcome. If you add up the investments by the 27 EU countries in the U.S. over the past few years, it exceeds 600 billion dollars. The EU also agreed to purchase 750 billion dollars worth of U.S. energy, but this is a quantity they would have had to buy anyway. It seems only Korea and Japan made poor deals.

- Korea agreed to invest 350 billion dollars in the U.S. Does this include investments that Korean companies had already planned before the tariff negotiations were concluded?

▲The Korean government needs to clarify this, but nothing specific has been disclosed yet. Naturally, the investments promised by Korean companies after the launch of the second Trump administration should be included in the 350 billion dollars. Once Korean companies invest 350 billion dollars plus alpha in the U.S., they will have little capacity left to invest domestically. If investments in the U.S. are not closely linked to the domestic industrial ecosystem, and if large-scale investments in the U.S. lead to the hollowing out of domestic industries, the significance of investing in the U.S. will be greatly diminished.

- Some argue that the conclusion of the tariff negotiations and the investments could strengthen Korea-U.S. industrial cooperation. What is your view?

▲For the U.S. to rebuild its manufacturing sector, it must form strategic alliances with competitive companies. In this regard, the recent joint chip production contract between Samsung Electronics and Tesla is highly significant. Similar collaborations are likely to increase in other sectors as well. However, while there is an agreement in principle, nothing has been concretely specified. Korea must work to ensure that the promised investments are concretely linked to Korea-U.S. industrial cooperation.

Professor Jeong Ingyo from the Department of International Trade at Inha University is being interviewed on the 20th at the Korea Institute for Advancement of Technology in Gangnam-gu, Seoul. Photo by Kang Jinhyung

- Do you think the Trump administration's tariff policy will continue in the future?

▲President Trump claims the usefulness of tariffs, even when it goes against the basic principles of economics. However, the U.S. cannot ultimately escape these basic principles-this is certain. While tariffs were raised in the first half of this year, they were raised by about 10 percent, which is not a huge increase. For now, companies have prioritized protecting their market share and have absorbed the tariff costs themselves instead of passing them on to export product prices. However, it will be difficult for companies to continue absorbing these costs for much longer. There is no need to wait until next year; the impact of tariffs has already been detected in producer prices in the second half of this year, and it is only a matter of time before consumer prices rise as well.

Currently, international oil prices are stable, so Americans do not feel much price pressure and inflationary pressure is relatively low. However, if oil prices rise and product prices increase due to tariff burdens, or if expensive goods produced in the U.S. start to be supplied to the market, Americans will inevitably suffer. This will become a significant political liability.

However, the U.S. is implementing large-scale tax cuts and needs tariff revenue to make up for the resulting tax shortfall. Tariffs that are differentiated by country are a separate issue, but I believe that tariffs applied uniformly to all countries will continue.

- What is the possibility of a revival of U.S. manufacturing?

▲Although the U.S. has a large population, there is a shortage of workers for high-tech industries and wages are too high. From a business perspective, it is not profitable to use American labor. The U.S. has recently announced its "Artificial Intelligence (AI) Action Plan" and seems to be placing significant emphasis on industries that link AI and robotics. The idea is to entrust a substantial portion of manufacturing tasks to robots and AI. There are sectors where this is possible. I believe the potential exists in areas where AI and robotics can be smoothly integrated into manufacturing. However, the chances of success in sectors that maintain traditional manufacturing methods are very slim.

Jin-gyo Jung, Professor of International Trade at Inha University. Photo by Jinhyung Kang

- Jamieson Greer, the U.S. Trade Representative, mentioned a "Trump Round" and suggested the end of the World Trade Organization (WTO) system.

▲When the U.S. first imposed tariffs, it cited national security crises such as fentanyl and illegal immigration as grounds. Later, with reciprocal tariffs, tariff rates differed by country. The most important principle of the WTO is Most-Favored-Nation (MFN) treatment, but this has been broken. The very foundation of the WTO has been shaken. Going forward, there will likely be many cases where National Treatment (NT) is also violated. The issue is not just the suspension of the WTO's appellate body, but that the U.S. has created a situation where it cannot coexist with the WTO. In this sense, Representative Greer, as the head of U.S. trade policy, made this point clear to the international community.

- What do you think will happen to the WTO in the future?

▲The biggest issue for the WTO is "How will it define its relationship with the U.S.?" But it is not possible to expel the U.S. from the WTO. The real problem is how the WTO will absorb the recent actions of the U.S., but in reality, there is no way to do so. If the U.S. tariff regime continues as it is, fundamental questions about the very existence of the WTO will inevitably arise. The outlook for the WTO has become quite bleak. However, if the U.S. withdraws from the WTO, China will likely take the lead, which is something the U.S. cannot simply accept. From this perspective, a voluntary U.S. withdrawal from the WTO would also pose risks for the U.S.

- Because of the U.S., discussions about expanding the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) among the EU and BRICS are becoming more active.

▲It has been reported that the EU is carefully considering joining the CPTPP this year, as strengthening economic cooperation with East Asian countries is an urgent priority for the EU. The EU has already concluded various trade agreements with most South American countries, and with most of the major countries in Asia as well. To respond to the era of extreme U.S. protectionism, the EU is likely to join the CPTPP or integrate it into a new form of economic bloc.

BRICS and the EU will not simply accept the U.S.'s high-tariff policy. While it may be difficult to impose retaliatory tariffs on the U.S., they will pursue a strategy of expanding the global market by forming new trade blocs through alliances with third countries, thereby creating alternatives to the U.S. market.

- The U.S.'s tariff measures are shaking the foundations of free trade and the Free Trade Agreement (FTA) system.

▲As the U.S. strengthens protectionism, FTAs have been destabilized, but no other country can do the same. Most countries will have to seek a system where trade can flow smoothly, which is why there is talk of "globalization without the U.S." Most countries, including Korea, are in a situation where they must maintain trade liberalization at all costs.

The new trade order pursued by the U.S. is being established and formed, and as a reaction, other countries are being forced to intensify their efforts toward trade liberalization. For now, each country is focused on resolving tariff issues with the U.S., but over time, discussions on trade liberalization among the rest of the world will become more active. Until now, BRICS has been more of a political event, but going forward, it is likely to take shape as a true cooperative bloc.

- It seems unlikely that the U.S. will simply stand by as new economic communities or blocs such as BRICS are formed.

▲It is still unclear whether BRICS countries can create a meaningful economic and trade bloc among themselves by giving up the U.S. market, even at the cost of significant economic losses. However, the U.S. will put these countries in a "prisoner's dilemma" situation. The U.S. will try to negotiate so that one or two countries break away. The U.S. will not target all of BRICS at once, but will try to pull one or two countries to its side to control the bloc.

- How do you think the U.S.-China trade war will unfold?

▲The reason China has pursued state-led industrial policy is to secure a technological base that would allow it to catch up with the U.S. in a short period of time. As a result, many Chinese companies have grown, but there are also many that survive on government subsidies. For various reasons, it will be difficult for China to reduce these subsidies. For this reason, the U.S.-China conflict is likely to continue for a considerable period.

- China is increasing its investment in Korea instead of the U.S. and is aiming to expand into the Korean market.

▲The U.S.-China conflict, or the side effects of U.S. tariffs on China, will manifest in various forms. Chinese companies are actively seeking to enter the Korean market. Legal and institutional support must be provided so that Korean companies can maintain their industrial ecosystem domestically in the face of competition with Chinese companies. There is growing concern about what will happen to domestic investment and jobs for Korean companies after astronomical investments are made in the U.S. This is something that must be seriously considered at the national level.

- With the U.S.'s tariff pressures and strengthening protectionism, a new trade order is emerging. What strategy should Korea pursue?

▲Korea has no choice but to continue its relationship with the U.S. market and the U.S. itself. At the same time, it is the responsibility of Korean trade and economic authorities to minimize various types of costs. While we must bear the enormous costs of accessing the U.S. market, there are also clear new business opportunities to capture much of the U.S. market previously held by China. However, the domestic industrial ecosystem must be robust for overseas expansion and investment, including in the U.S., to yield meaningful results. Therefore, at this point, policy support for nurturing domestic industries is just as important as maintaining relations with the U.S.