In general terms, trade barriers may be referred to as measures that public authorities or the government introduce in an attempt to render imported services or products less competitive as compared to the locally produced or available services and products (Kang, 2011). It is worth bearing in mind that not all aspects or factors which are hindering, restricting or preventing free trade should be treated as trade barriers. In South Korea for instance, tariffs have been deployed as the primary means of protecting locally produced goods and services. Tariffs can be referred to as taxes applied on imported products as soon as they enter the country. Imported taxes or duties are calculated in percentage form of the imported product’s value. The collection of tariff fees for South Korea is done through their customs agency. Tariffs discourage or restrict importation by inflating the prices of imported goods about the domestic goods. Korea maintains a designed tariff quota system for stabilizing the local markets. Customs duties are frequently adjusted after every six months, limited to a particular initial rate, minus or plus 40 percent. Though there is flat 10% VAT on all domestic and imported goods, a particular tax exercise of 10-20% is again levied on the importation of certain luxury and consumer durable products (Kang, 2011). For such luxury or durable product, their prices have to be adjusted to maintain the profit margins. Consequently, they tend to struggle to compete with similar products that are sourced or produced locally.
Protectionism in Korea is seen as a negative image in subsidizing and isolating industries which could not fairly compete against the foreign ones (Kang, 2011). Most of the local industries support protectionism to gain a competitive edge over their foreign counterparts. It, therefore, means their cost of production will be relatively lower than that of the competing industries translating to better price offers in the local markets. Custom corruption further makes it expensive to import products from the country. It means besides the state levies applied on imported products; extra fees are paid on corruption deals in shipping goods to Korea. These aspects not only make it difficult to import but also reduce the potential profit margins on imported products, thus making it hard for these imported goods to compete fairly against locally generated products.
South Korea has proximity to the greater Asia-Pacific area and adjacent markets. It, therefore, presents a very viable opportunity for expansion while doing business in South Korea. Again, the South Korean economy is very stable, characterized with electronics, steel, shipbuilding and automotive expertise. It possesses the highest standard broadband penetration across the globe, with an estimated speed of 100 megabytes, together with leadership in the usage of 4G mobile. These aspects promote proper and efficient communication, quality labor, essential resources, and safety while doing business in South Korea. Another factor that contributes to freedom of trading within Korea involves the country’s existence of fifteen Free Trade agreements (FTA) and a further eleven which are still under negotiation. (www.gov.uk)
South Korea has in the past, been classified as one of the greatest economic success stories in the world. Again, it is one of the very few nations to have recorded economic growth more than 5% in five straight consecutive decades (Kim, 2014). Of course, this has to be a high achievement resulting from careful governmental macro-engineering, sheer hard work, substantial business activities from both the larger national population and the foreign business partners.
References
Kang, M. (2011). South Korea: Temporary Trade Barriers Before and During the Crisis. SSRN Electronic Journal SSRN Journal, 12-45.
Kim, J. L. (2014). Tariff and Non-tariff Barriers to Trade in Asia: A South Korean Perspective. Regional Integration in Asia, 321-340.
Doing business in South Korea: South Korea trade and export guide. (n.d.). Retrieved February 08, 2016, from https://www.gov.uk/government/publications/exporting-to-south-korea/exporting-to-south-korea
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