Ambassador Speeches

Remarks by Ambassador Thomas C. Hubbard at the Federation of Korean Industries

November 8, 2001

Thank you, Chairman Kim, and members of the Federation of Korean Industries' Board, for inviting me here today. I am delighted to be able to address this distinguished gathering of business leaders in Korea as I settle into my role as Ambassador. As you may know, I arrived here on September 11, just as the terrorist attacks were taking place in New York and Washington. Much of my time since then has naturally been devoted to the overriding challenge of building international cooperation to cope with the scourge of terrorism. I want you all to know how pleased we are with the support, both moral and material, that we have received from the Korean Government and people. Today, however, I would like to focus on another critical part of my role here in Korea -- that of further strengthening the mutually beneficial economic and trade relations between our two countries.

So, today I will try to give you a U.S. perspective on U.S.-Korea trade relations, on Korea's economic prospects, and on the economic aftermath of the September 11th terrorist attacks. To begin with trade, Korea is a vitally important partner of the U.S., with a large and growing market, both in and outside of Seoul. Korea is the world's 11th-largest economy. Last year, the U.S. and Korea did roughly $68 billion in two-way trade, with U.S. Department of Commerce figures showing that the U.S. registered a $12 billion deficit. The U.S. is Korea's largest export market; Korea is America's 6th-largest export market, and our 4th-largest market for agricultural products.

American firms are very active in Korea, and in most sectors they are maintaining or gradually increasing their market shares. Another indicator of U.S. business interest in the Korean market comes from the Commercial Section of our Embassy, which has supported the efforts of over 3,000 U.S. firms this year. The American Chamber of Commerce in Korea also reflects this high level of commercial interest in the Korean market. It is one of the largest and most active AMCHAM chapters in the world.

The Korean economy has made an impressive recovery from the financial crisis of four years ago. Recently, however, growth has slowed as exports decline to Korea's largest markets, which are also experiencing their own economic downturns. Korea depends heavily on exports to sustain growth, making it especially vulnerable to drops in world demand. A case in point is the worldwide downturn in electronic commodities, which has affected the Korean economy. Despite the sluggish export situation during 2001, the Korean economy has impressively managed to achieve a modest expansion, even as many other competing Asian economies contract and fall into recession.

Over the last few years, there has been a qualitative reorientation of the Korean economy toward a more market-based and transparent structure from which retreat is no longer an option. Though a great deal of economic and financial reform has been accomplished, more remains to be done. Korea needs to stay the course; financial reforms must continue for the international economy to retain its high level of confidence in Korea, and to continue investing here. Korea still needs more transparency in corporate governance and financial accountability. Korea must continue to reform, restructure, and improve if it is to strengthen its position in this intensely competitive global economy, especially as China continues to attract much foreign direct investment. Korea has risen to the challenges of the global economy many times in the past. I am confident that it will do so again. Continued restructuring, reform, and deregulation will free market forces and better enable Korea to achieve its full economic potential.

At the level of the individual firm, many Korean corporations have completed the initial phase of financial restructuring. Few, however, have embarked on serious operational restructuring to reduce their heavy debt service burden. Without such restructuring, financial problems could reoccur. One result of the unavoidable use of public funds to recapitalize the banks and assist financially struggling firms has been the de facto nationalization of much of the banking industry. Clearly, it would be healthy for the government to sell off banks as soon as possible despite the low prices prevailing in the Seoul stock market.

Ultimately, to succeed in the global competition for capital, foreign and domestic investors alike must be confident about information on the financial condition of the companies in which they are investing. Companies that are appropriately structured, financially and operationally, will be able to obtain finance. Those that are not will find themselves in dire straits. International markets will be watching how successfully the Korean government manages this transition to a more market-driven financial system.

It seems clear that the old days of "Korea, Inc." are over. A corporate culture is emerging that is more in tune with the current demands of a global economy. Of course, as the Korean economy has recovered from the 1997 financial crisis, there are calls for a return to business as usual, and an end to restructuring. I am convinced that the Korean people will reject such a short-sighted approach. I believe that Korea can make the reforms needed to restructure its economy to thrive in the 21st Century.

Reviewing the U.S.-Korean trade relationship, the Korean government continues to take impressive steps to further open its markets. However, there too, much remains to be done. The U.S. supports a market-centered international trading system based on global rules and standards. Within that framework, we will pursue our trade interests both bilaterally and through the World Trade Organization. Occasionally, disagreements will arise between Korea and the United States, but these are natural given the breadth and volume of our interchange. We should, and do, work out our disputes through discussions and under the auspices of the world trading system. A recent positive development is the new Daewoo-GM partnership. Of course, this development alone will not resolve all issues concerning trade in autos, but it could greatly improve private sector cooperation in the industry.

I know many of you here have an interest in the U.S. International Trade Commission's recent decision finding injury from imports for the U.S. steel industry. Let me clarify that no decisions have been made yet to impose any trade restrictive measures, or for that matter whether any measures will be imposed. The USITC will now conduct additional hearings and will provide a recommendation to the President December 19th on what steps he should take. The United States will consult with Korea and other WTO member countries that may be affected by our decision. As always, we will consider their legitimate concerns in making a final decision. In addition to the USITC recommendation to the President, a U.S. Government interagency group will consult with U.S. and foreign steel producers, as well as domestic steel consumers, and make its own recommendations to the President. The President will then have 75 days to decide what, if any, remedy is appropriate. Any remedy action taken by the President will be consistent with our WTO obligations. I might add that since 1970 the American steel industry has carried out restructuring, closing down nearly 20 percent of capacity and permanently laying off 330,000 workers, and this restructuring process will continue in the future.

As U.S. and Korean economic and trade relations have vastly expanded, our capacity as governments to resolve issues has also improved significantly. The officials of our two governments today listen to each other and engage on contentious issues. We may not always agree fully on every matter, but we each seriously consider what the other has to say and seek to take steps to meet our mutual concerns. We appreciate the Korean Government's efforts to launch a new round of WTO trade negotiations. Not all problems have been resolved, but the nature of the dialogue has evolved to one of ever-greater cooperation and problem-solving. It is in that spirit that we are tackling some of the thornier issues on our bilateral agenda including steel.

Among those harder issues, we've made some progress in the area of protecting intellectual property rights. We believe it is particularly important to improve the Computer Programs Protection Act and the Copyright Act. President Kim's well-publicized call earlier this year for a stepped-up enforcement campaign against copyright piracy was an important example of the new environment I spoke of earlier, and an initiative that we hope will be both ongoing and effective. Nevertheless, we still have concerns about the overall state of IPR protection in Korea.

To summarize my views on the Korean economy and our bilateral trade relationship, the United States has an important and overriding interest in a stable and prosperous Korea. American companies, workers and consumers all benefit from economic prosperity in Korea and healthy trade flows between our two nations. A strong, vibrant Korean economy is important to U.S. interests, just as an expanding U.S. economy and open market is important to Korea's.

Of course, our interest in Korea extends well beyond economics and trade. A strong, healthy Korea is critical to our fundamental interests in Northeast Asia. Korea has been, and will continue to be, our friend, partner, and ally. The U.S.-ROK security alliance has been the linchpin of peace and stability on the Korean Peninsula and in Northeast Asia for half a century, and remains so today.

At the APEC Summit in Shanghai last month, our two Presidents talked not only about economic and trade issues and policies toward North Korea, but also about the economic impact of the terrorist attacks on the U.S. and their effect on the U.S., Korean, and global economies. Of course, the U.S. economy has been gradually weakening since late last year. Earlier this year, in response, the Bush Administration obtained the approval of Congress for a partial refund of income taxes to Americans. This money started flowing to American pocketbooks just before the September 11 tragedies. In addition, Federal Reserve Board Chairman Greenspan has further reduced the Federal Reserve Board interest rate and provided extra money to the American banking system.

Thus, the Bush Administration succeeded in using both fiscal policy and monetary policy to maintain confidence in the American economy as a result of this attack. Over time, as fiscal and monetary policy increase their stimulative effect, I am confident that strong, non-inflationary growth will resume in the U.S. But, as world leaders agreed in Shanghai, concerted efforts by all of us are needed.

In closing, I would like to reiterate that American ties with Korea have never been closer and more cooperative. Yet the potential for further growth and development of those ties is far from exhausted. We live in a challenging time, but it is also a period of great opportunity. By expanding and deepening our alliance, including our economic interchange, we will contribute much to our own people's well-being and to global prosperity. I look forward as Ambassador here to doing all in my power to further our bilateral relationship and, in doing so, I ask for your friendship and counsel.