Entry # 21 20600331

My Opinion/Summary:

The reintroduction of United States beef into the Korean market happened on the eve of Lee Myung Bak’s term of office. This is not a good strategic plan for him in Korea. United States beef has not been in Korea since last year when a full ban went on it. Lee Myung Bak’s approval rate dropped dramatically since his landslide victory over his competitors. Furthermore, no Korean president’s approval rating has dropped so low and so quickly. The Korean public has disliked this decision so much that they have been protesting in the streets. More than protesting, they tried to march onto Lee Myung Bak’s house. However, they were met with force from the Korean Police.
Another problem that Lee Myung Bak is facing is that his policy-makers pushed for exports. This fueled growth in the economy, however, inflation has taken a huge rise. Therefore, prices of everything and not just oil are rising in the United States. Public opinion is a huge part holding a public office. The public opinion of him is growing worse and worse everyday.
All of these problems are not allowing Lee Myung Bak to implement the plans that he wishes to put forth. The negative publicity put into place with his first two decisions in office is greatly hindering the possible good that could possible be done. With such hostility in the air, it would be wise and prudent to change something in the policy.


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Korea's U.S. Beef Brouhaha

President Lee Myung Bak's removal of restrictions on U.S. beef has plunged his administration into a crisis that could imperil a free-trade pact with the U.S.

South Korean riot police disperse protesters as they try to march to the Presidential House after a candlelight vigil against US beef imports, in Seoul on June 8, 2008.


by Moon Ihlwan
Rarely has a newly anointed Korean President fallen so far and so fast. Less than four months into a five-year term, Lee Myung Bak's decision to remove restrictions on U.S. beef has sparked widespread protests over food safety and engulfed his administration in a crisis that threatens a free-trade agreement (FTA) between the two countries. Lee's approval ratings have plunged to new lows, and opposition politicians are planning to boycott Parliament.
It wasn't supposed to happen this way. Lee had strong voter backing after winning a landslide victory in December. On Apr. 18, Lee, eager to cement ties with his country's closest ally, lifted the ban on U.S. beef imports for the first time since it was re-imposed last year. Korea had banned all American beef in 2003 following an outbreak of mad cow disease in the U.S. Seoul briefly allowed in boneless beef from cattle younger than 30 months of age before suspending that last year when bone chips turned up in shipments.
Seoul had hoped to coax the U.S. Congress into ratifying a free-trade accord, which the two governments signed last year. The lifting of the ban came on the eve of Lee's first summit with President George W. Bush in the U.S. in April. Korea was once the third-largest U.S. export market for American beef, with an annual turnover of more than $800 million a year. The on-again, off-again beef ban had fueled opposition to the free-trade pact among key members of the U.S. Congress, including Senate Finance Committee Chairman Max Baucus, from the beef-producing state of Montana. A grand gesture from Seoul might do the trick, was the thinking.
Protests Outside Seoul's Blue House
So much for grand gestures. For the past three nights, as many as 60,000 farmers, students, and housewives have demonstrated against the resumption of American beef imports. They have jammed Seoul's streets leading to the Blue House, the presidential residence. Many of them have shouted slogans demanding Lee's ouster for risking public health, and accused the Korean leader of kowtowing to Washington. Some think Seoul could have let in beef from young cattle bred in the U.S. but kept out meat from older cattle, which are more susceptible to mad cow disease. Korea's neighbor Japan bans imports of beef from older cattle.
Lee's loss of popular support has been swifter than anything ever experienced by a Korean President. His approval ratings (BusinessWeek.com, 12/18/07) are now below 20%, down from almost 60% in early March. And a June survey by pollster Korea Research and YTN cable news network has shown that 87% of those polled expressed disappointment with the government's talks with U.S. officials over beef. "We have reached a point where we can't expect much political leadership in Korea," lamented Lee Hahn Koo, a senior member of Parliament from the ruling Grand National Party, on June 9.
Government officials worry that the row could derail the free-trade pact, which experts estimate could boost two-way trade by $20 billion annually. Opposition lawmakers have boycotted a new session of parliament this month, threatening to shelve the trade pact for now. "Given huge political pressures, it would be difficult even for the Korean National Assembly to ratify the FTA unless the beef issue is resolved," says a senior aide to Lee who asked not to be identified.
Rising Inflation Hurting Consumer Confidence
Lee's misfortunes aren't only beef-related. His choice of policymakers, who pushed for export-fueled growth but didn't worry enough about inflation, hasn't helped. Amid soaring oil and material prices, Lee's government allowed the Korean currency, the won, to depreciate by about 10% against the U.S. dollar. That helped propel inflation to a seven-year high of 4.9%. Now with consumer confidence at a low ebb the government faces the prospect of missing its target for 6% economic growth this year. Private economists forecast growth between 4% and 4.9%, compared to last year's 5% growth and 5.1% in 2006.
The brouhaha over beef is interfering with Lee's plan to institute pro-business reforms. He is pushing to privatize government assets that would free up tens of billions of dollars to stimulate the economy as well as an ambitious tax reform package. Also on the agenda: a tougher hand with labor unions and deregulation of the financial-services sector. "Lee's blueprint for change is fading badly even before he opens it," says Park Gil Sung, a sociology professor at Korea University.
Seoul is hoping Washington can step in with a diplomatic solution to defuse the crisis. On June 9, Lee dispatched a team of negotiators to Washington, asking them to make sure shipments of beef from cattle older than 30 months won't be allowed. At the weekend, Lee called Bush for a 20-minute phone conversation during which Bush, who is scheduled to visit Seoul in July, told Lee that Washington would cooperate closely with Seoul. He said the U.S. is "ready to support American cattle exporters as they reach a mutually acceptable solution with Korean importers on the beef trade," according to White House spokesman Gordon Johndroe, who gave no further details.
The Beginning of a Trade War?
Eager to appease an angry public, Seoul is grappling for a solution. It could press for a renegotiation of the terms of the beef trade. But asking the U.S. back to the table or scrapping the existing accord could trigger calls in the U.S. for tit-for-tat amendments to the free-trade pact. Detroit's concerns that Korean cars and parts will surge into the U.S., risking even more U.S. auto industry jobs, might find a more receptive audience in Congress.
Could the tensions develop into a full-blown trade war? It's possible, says Han Sangwan, chief economist at think tank Hyundai Research Institute in Seoul. The beef dispute could become a bigger issue if it's taken up during this year's U.S. Presidential election. The Korean public could inflame tensions, too. "Unless the U.S. shows flexibility over its beef exports to address Koreans' concerns over food safety, a wholesale boycott of U.S. products could follow," says Han. "And that could trigger protectionist retaliation." The collapse of an FTA would mean a "serious chasm between the two," he adds.
Lee now appears to be reconsidering the hard-charging style that he displayed as the CEO at Hyundai Group. The forcefulness that worked at a conglomerate that has long epitomized Korea's breakneck industrialization is being regarded as a liability and the mark of a leader who is deaf to public demands. In a meeting with Catholic priests on June 9, Lee admitted that he had made policy mistakes and hinted at a Cabinet shakeup. Already seven top presidential aides have offered to resign. Winning back the public's trust won't be easy for Lee.
Moon is BusinessWeek's Seoul bureau chief.