U.S. Commerce Secretary Malcolm Baldrigepraised South Korea's new surplus-cutting trade policies but
warned of possible protectionist retaliation if Seoul's market
liberalisation efforts falter or fail.
    In a press conference after talks with South Korean
leaders, Baldrige called the government's announced intention
to regulate exports and boost imports "a very, very important
step, the right direction for the Korean government to take."
    The government adopted the new policies last week in the
hope of heading off a trade war with the U.S.
    Baldrige said the policies "showed an understanding of the
fact that this country cannot go on indefinitely growing by
exports alone."
    "There has to be enough of a change so that domestic growth
begins to take more of the load," he said.
    South Korea had a 7.2 billion dlr trade surplus with
Washington in 1986, thanks largely to booming sales of cars and
consumer electronic goods. It racked up another 1.4 billion
dlrs in surplus in the first quarter of this year.
    Baldrige said Seoul's package of measures was "broad enough
and comprehensive enough so that ... Actions can be taken for
liberalising imports (and) increasing the domestic economy, if
the government is willing to follow through."
    "We will be watching the implementation of this new policy
direction very closely," he said. "Because of the protectionism
growing in the U.S., We see a real problem if Korea does not
keep on the same path ... Of steadily increasing
liberalisation.... If that should falter or fail or turn
backward, I'm as sure as I'm standing here that we'd see
protectionist movement in the U.S."
    Baldrige said he and South Korean Trade Minister Rha
Woong-bae spent much time discussing trade problems in specific
product categories.
    These included service industries, which he said were still
too much of a closed sector in South Korea, and computers and
cars. Baldrige said he urged speedy action on removing the
tariffs and taxes on imported U.S. Cars which can make them
sell for up to three times their American prices.
    "We want to stop that. With this sort of thing, there's
going to be trouble somewhere down the road," he said. "We are
just pointing this out."
    Asked if Seoul's measures could succeed without a
revaluation of the won, which Washington has been urging for
months, Baldrige declined to comment. "We don't have any target
for any particular currency, but we do feel that currencies
around the world, if we are going to be successful as a world
economy, have to reflect the fundamentals of the various
economies involved," he said.
    Baldrige said he had agreed to Rha's proposal for
cooperation on forming U.S.-South Korean joint ventures in
third countries. The American government would be pleased to
encourage U.S. Firms to get involved, he added.
    Commenting on President Reagan's decision to increase
tariffs on certain Japanese imports to the U.S., Baldrige said
Washington's trade problems with Japan were not comparable to
its difficulties with South Korea.
    "I think the attitude in Korea is both reasonable and fair,"
he said. "It's a firm attitude. We don't get anything for
nothing or just by asking for it.
    "But our negotiations are friendly and reasonable and they
usually end up with something good happening at the end that
both countries live up to."
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