Category: Korea-Business

It is humorous to listen to Koreans complain about "invisible barriers" to their products:

Sales of Japanese cars in Korea are soaring, but Hyundai Motor isn’t doing nearly so well in its eighth year in Japan. The problem may be the high non-tariff barrier, a stumbling block for Korean automakers in Japan. The Korean government meanwhile does not discriminate against Japanese cars and Korean consumers are also generous towards their hefty price tags.

A Hyundai official in charge of vehicle shipments in Japan shared a recent bizarre episode. A Japanese customs official, detecting a tiny scratch on the windshield of a Hyundai car, demanded the company replace the windshields of all 500 cars that were going through customs at the time. The Hyundai official thought the request was preposterous but had no option but to do as told.

I have to wonder what American car manufacturers and beef producers are thinking reading these complaints?

This is just one reason why the US should not sign a free trade agreement with Korea:

In a move that could hinder the passage of a bilateral free trade pact, South Korea effectively blocked all U.S. beef imports from reaching store shelves Thursday after banned parts were found in a recent shipment.

The discovery of unauthorized animal parts in a July shipment, including spinal material, comes as the United States pushes for a full reopening of what once had been the third-largest overseas market for its beef.

Seoul ended a ban of three and a half years last month on U.S. beef that was prompted by a 2003 outbreak of mad cow disease in the United States, allowing in boneless U.S. beef from cattle under 30 months old.

But South Korea announced Thursday that it was stopping inspections of U.S. beef under quarantine, meaning that beef already in warehouses would be prevented from reaching store shelves. It will now decide whether to ban U.S. beef altogether.

Any agreement signed with the Koreans will not be upheld by their side and the continuous banning of US beef is just a perfect example of this.  The Korean government has now banned all US beef to Korea because of one box of T-bone steaks that was labeled for consumption in the US. 

You may remember back in June US beef shipments were banned when four boxes of beef that were meant for the US market some how ended up in the Korean beef shipment.  It was later found that the four boxes were samples of US beef provided to a South Korean company in California.  This company was some how able to get the four boxes of beef into the US shipment to Korea, which ended up banning US beef all together until the US Congress got involved and threatened trade sanctions. 

 I find it hard to believe that the US beef exporter, Cargil would have been sloppy enough to send another box of meat that was meant for US consumption.  I agree with Brendon that there may be a "Patriotic Korean" somewhere along the export chain making sure that a box of beef meant for the US market ends up in the shipment of beef meant for export to Korea.  There is already evidence of this from the investigation after the June ban and I would not be surprised if another South Korean connection is found again this time. 

Everyone ask yourself, would Korea pull this crap with China?  We already know the answer to that question when the Korean government backed down on their Chinese kimchi ban during the Great Kimchi Crisis of 2005 when China threatened a trade war with Korea.  There has never been a problem with Chinese kimchi since.  If the US government is serious about exporting beef to Korea than it needs to start learning to play by rules the Koreans understand.  Just ask China. 

You can read more at Lost Nomad.

Not even protesters throwing crap on U.S. beef, has been able to slow the demand for the product:

Consumer demand is now sizzling, and experts are predicting a major market shakeup once imports begin to arrive in earnest.

Lotte Mart, the first of the big supermarkets to resume selling the meat, said its stock of 40 tons of chilled beef sold out on the second day Saturday at all its branches. At that rate, it expects to sell the remainder of its frozen U.S. beef by Tuesday morning. Market insiders attribute the higher than expected popularity to the price competitiveness of U.S. beef in comparison to its quality. In other words, it’s cheap and tasty.

The only people more upset about this than the protesting farmers, are the black market ajummas outside the USFK camps.

From the Chosun:

The prices of beef, pork and chicken are all falling in the aftermath of the Korea-U.S. free trade agreement. U.S. beef imports are still minimal but just the expectation of a full fledged import onslaught is weighing heavily on domestic meat prices. It’s good news for consumers but bad for Korean farmers.

The National Statistical Office says prices of pork and both domestic and imported beef fell together for the first time in eight years in the April-to-June quarter. Domestic beef prices slipped 2.0 percent and foreign beef 3.7 percent year-on-year, while pork dropped 6.9 percent.

The Chosun article tries to make the fall in prices for meat seem bad for Korea and even offers this evil looking American cow to back up their claims:

The fall of food prices is good for consumers and if Koreans feel they need to support the domestic meat market than they still have the option of buying Korean meat just like car buyers in the US have the option of buying a cheaper Korean car or a more expensive American one.  Rising quality of Korean cars and cheap prices is forcing American companies to improve the quality and prices of the vehicles they offer.  This is called capitalism and free trade, in the end the consumers win, not just the evil American beef producers. 

From Reuters:

Foreign direct investment plans lodged with South Korea fell for the fourth successive quarter in the April-June period, data showed on Wednesday, denting the Asian nation’s ambition of becoming a regional business hub. The commerce ministry said foreign direct investment commitments fell 35 percent to $1.76 billion for the second quarter from a year earlier, following 28 percent and 3.9 percent annual drops respectively for the previous two quarters.

Analysts listed high equity valuations, high costs of doing business and an inflexible labour market among the factors that have been pushing foreign investors away from South Korea and toward cheaper places such as China, Vietnam and India.

There are a variety of reasons for the drop in FDI to Korea, but I think the Lone Star witch hunt is the straw that broke the camel’s back.

The US and South Korea have had a continuous back and forth fight over the status of US beef in Korea.  The Koreans are looking for anything to ban US beef in order to protect their own domestic beef industry at the expense of South Korean consumers who pay some of the world’s highest prices for beef products.

Earlier this month the fight over US beef continued when South Korea banned US beef again because in a massive shipment of US beef the inspectors found four boxes of beef that were produced for the US market not the Korean market because they contained bone fragments which are forbidden by the South Korean government.  The latest ban was enough that it got Congress moving on this beef fight with threats of bringing the issue up to the World Trade Organization.  These threats got the South Koreans to drop their ban, but for how long is anyone’s guess at this point.

However, what is interesting is that details are now beginning to emerge of how the four boxes found themselves inside the container with the rest of the US beef designated for export to South Korea.   Read the whole article but here is (pardon the pun) the meat of the article:

Four boxes of beef, weighing about 287 pounds, were mistakenly sent to South Korea as samples on June 2, although they were meant for domestic consumption, said Kim Do-soon, an official with South Korea’s Agriculture and Forestry Ministry.

The U.S. Agriculture Department informed Seoul of the latest mistaken shipment, Kim said.

Two U.S. meat plants, run by Tyson Foods Inc., processed the beef and have been suspended from handling meat bound for South Korea, the official said.

A spokesman for Springdale, Ark.-based Tyson, Gary Mickelson, said that, “contrary to South Korean news reports, Tyson Foods did not ship the beef in question.”

“We produced it for domestic sale and consumption,” he said Tuesday. “The product was sold by Tyson Foods to a Minnesota company, which resold the product to Iowa-based Midamar Corp.

“Midamar mistakenly exported the beef to South Korea several weeks ago without our knowledge, involvement or permission,” he said. “We’re once again working through USDA in hopes of quickly resolving this problem.”

Mickelson would not say which two plants were involved. The company has several facilities in Nebraska.

A spokesman for Midamar Corp. of Cedar Rapids, Iowa, said his company did not send the four boxes to South Korea.

Darrin O’Brien, who works in export sales for Midamar, said they were sent to a South Korean company in California, which he said he would not identify. He also said he didn’t know what that company had done with the samples.

Does anyone else find it interesting that the four boxes found in the US beef shipment to Korea were actually sent to a South Korean company in California and then magically some how appeared in the US container in South Korea?

Things that make you go hmmmm…….

The first ever export of rice from Korea to the US has been announced:

A shipment of South Korean rice was headed to the United States on Tuesday, marking the first time that the country has exported its staple food amid efforts to protect the rice market from foreign imports.

The 2-ton shipment, set to be airlifted later Tuesday, is part of 52.5 tons of rice that a Korean-American businessman in Los Angeles, Warren Jung, is importing, said Song Mi-ryong, an official of the North Jeolla provincial government in the country’s southwest.

Koreans living in Los Angeles were expected to be the main consumers of the Korean rice, Song said.

The 136 million won (US$146,000; �109,000) deal marks South Korea’s first rice export.

Song said the importer, Jung, agreed to buy an additional 1,050 tons and is scheduled to sign a US$2.73 million (�2.04 million) contract Wednesday.

The export to “the U.S., a major rice producing nation, represents evidence that U.S. consumers recognized the quality of North Jeolla province rice,” said Kim Wan-joo, governor of the province.

Actually no Mr. Governor because like the article states Korean-Americans are the ones expected to buy the rice, not the general American public.  Additionally what I find interesting is that the US is allowing South Korea to export their rice to America and yet the US cannot export rice to South Korea.

After the latest ban on US beef imports into Korea was announced this week Senator Ben Nelson had some strong things to say about South Korea:

“Of course, shipments intended for domestic use shouldn’t have been sent to Korea, and there was a mess-up in the U.S. Department of Agriculture that contributed to this mistake,” said Nelson, D-Neb., on Wednesday.

But Nelson categorized the shipments as a procedural problem, not a safety concern.

“Instead of just dealing with the one thing … nope, they shut it all down,” Nelson said. “They take every opportunity to shut off our beef, then they want a free Korean trade agreement.”

“It’s clear that the reaction by the South Korean government was far out of line with the problem. It indicates to me that they were probably looking for an excuse to stop imports,” Nelson said.

You don’t say. 

The Korean government will just continue to play this game as long as there are no consequences for it.  Everyone remember the Great Kimchi Crisis of 2005 between Korea and China?  During the crisis the Korean government tried to stop Chinese kimchi imports because they supposedly were tainted with lead.  The Chinese quickly responded by denying certain Korean imports in kind and suddenly the Great Kimchi Crisis was solved. 

This is the same kind of action that needs to be taken in regards to US beef.  Senator Nelson appears to finally be getting the US government moving in that direction:

Nelson said he planned to send a letter to Senate Finance Committee Chairman Max Baucus, D-Mont., asking him to withhold any committee action on a free trade agreement with South Korea until that country resumes American beef imports.

He also will be asking the U.S. trade representative to proceed against South Korea in the World Trade Organization for “their unfair treatment of U.S. beef.”

How about turning around the first ship full of Samsung Electronics products and see what happens?

The Chosun is not happy that members of the US Congress are trying to begin renegotiations of the recently signed Free Trade Agreement between Korea and America:

Two U.S. Congressmen — Charles Rangel, chairman of the House Ways and Means Committee, and Sander Levin, chairman of the trade subcommittee — have written to the U.S. Trade Representative (USTR) to call for renegotiations of the U.S. free trade agreement with Korea. The letter urges new talks with Korea on systematic barriers in automobiles, industrial products, agricultural and service markets.

This is the second time the U.S. has raised objections to the Korea-U.S. FTA, following a call for renegotiations on the environment and labor. These requests for renegotiations go against the general principles of negotiations and international norms.

Here is my favorite paragraph from the article:

The existing Korea-U.S. FTA was reached only after both sides took strenuous pains to find a balance between each other’s interests. Trying to unilaterally redesign the agreement to their advantage is tantamount to attempting to break the backbone of the trade pact. And the moment the U.S. shifts the burden of fresh negotiations onto Korea’s shoulders, the deal will go to pieces.

What I like about this paragraph is that it is quite ironic if you substitute Korea-US FTA in the paragraph with the US-ROK cost sharing agreement.  The US-ROK coast sharing agreement was reached late last year after long negotiations only to be unilaterally changed by the Korean government (see here & here) when they saw an opportunity to do so to their advantage when former Secretary of Defense Donald Rumsfeld was forced to resign. 

The FTA will not be renegotiated.  The two Congressmen in question are trying to score domestic political points with their constituencies in the US over the FTA, especially Senator Levin since he is from Michigan the home of the American auto industry.  They have to give an appearance of going down fighting against the Korea-US FTA in order to secure votes at home. 

With all this said I find it more than little ironic that the leading South Korean newspaper, the Chosun Ilbo is complaining about a couple of Democrat Congressmen playing domestic politics over the FTA and yet says nothing when the Korean government pulled one of the biggest back stabbings of the US in the history of the US-ROK alliance last December. 

Japanese motor companies overtook the United States in car sales last year:

Japan has regained its position as the world’s largest car producer after 13 years. China ranks third following the United States and outdistancing Germany. According to statistics for 2006 published by the Organisation Internationale des Constructeurs d’Automobiles on Monday, Japan overtook the U.S. by producing 11.48 million cars, up 6.3 percent from 2005 (10.8 million cars). Japan was the world’s top car-producing country from 1980 to 1993 but fell to second in 1994.

The U.S. slipped to second for the first time since 1994, producing 11.26 million vehicles. U.S. production decreased 5.7 percent from 2005 (11.95 million cars), registering a decrease for the fourth consecutive year. China produced 7.19 million cars in 2006, overtaking Germany, which manufactured 5.82 million cars, and becoming the world’s third-ranking car-producing nation. China’s production showed a sharp increase of 25.9% from 2005 (5.71 million cars). South Korea ranked fifth, producing 3.94 million cars, up 4.3 percent from 2005. France, the sixth-ranked country, made 3.17 million cars, down 10.7 percent from the previous year and lagging far behind South Korea.

Hopefully this will be a wake up call to the US automobile industry which appears to be poised to be by passed by China in coming years as well.  What is interesting is that China manufacturing abilities are being aided through industrial espionage being committed in Korea:

State prosecutors yesterday charged nine former and incumbent employees of Kia Motors Corp., the nation’s second-largest automaker, for leaking core manufacturing technologies to China.

The illegal transfer would cause trillions of won in loss to the domestic car industry, the Suwon District Prosecutors’ Office said.

Five of them were arrested and indicted in the first industrial espionage case involving the automotive industry in Korea. Four others were charged without detention.

They are suspected of colluding to leak confidential data on nine separate occasions from Kia to a Chinese company since November. They received a total of 230 million won ($248,620) in exchange for the data, the prosecution said.

It seems like everything is made in China now a days so why not our cars as well seems to be the trend.