Europe Tears Down Borders To South Korea. Will Japan Be Next?

Bertel Schmitt
by Bertel Schmitt

When a country gets desperate, it closes its borders to imports. It’s a sign of surrender: We can’t compete anymore, so let’s close the doors. Closed borders rarely create jobs. In the contrary, they drive prices up, and everybody pays. Import restrictions are the most insidious tax a country can levy on its citizens. And they readily pay for it. Trade wars are an easy sell. Especially to people who cannot balance their checkbook. The price will be paid later.

While the U.S. is closing the door inch by inch, the rest of the world goes the totally opposite way.

Korea signed a free trade deal with the EU yesterday, reports NPR. If approved by the EU parliament (pretty much a done deal), the agreement will come into force on July 1, 2011.

EU president Herman Van Rompuy, said that the pact “sends a strong signal that trade liberalization is key to the recovery of the world economy.”

British Prime Minister David Cameron hopes that the deal will be “laying the ground for further free trade agreements between Europe and other countries, including India, in the future.”

There’s another country that can’t wait: Japan. Japan hopes to follow in South Korea’s footsteps by rapidly striking a free trade deal with the EU, a senior Japanese official told AFP. Japan competes with South Korea in a number of areas including auto production. They want the same preferential access to the European market, home to half a billion people.

It’s not that the Europeans are opening up their borders out of the kindness of their hearts. They have a lot to export: Cars, machinery, foodstuffs. They learned that a common market is good for business. The European Commission estimates the deal will eliminate $2.1b worth of industrial and agricultural duties for European exporters to South Korea. The EU will cut some $1.53b of duties for Korean importers. Hyundais will be cheaper in Europe. BMW’s, Mercedeses, and Audis will cost less in South Korea. Both win, and amazingly, the Europeans win a little more.

I guess the U.S. will have to learn the hard way that a closed market is bad for business.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • AaronH AaronH on Oct 07, 2010

    "Import restrictions are the most insidious tax a country can levy on its citizens" I would say Fiat Currency Inflation and Income taxes are worse. The USA is by FAR the most open market in the world! Almost all imports are subject to less than 3% duty.

  • JJ JJ on Oct 07, 2010

    I think when you compare a 1989 Trabant to a '89 Veedub Golf that's about all you need to know about protectionism in general. I think Ford would still be cranking out Crown Vics though if the US hadn't opened up it's market to foreign imports as much. They might even still have had bench seats...and maybe...carbs :)

  • ToolGuy This is the kind of thing you get when you give people faster internet.
  • ToolGuy North America is already the greatest country on the planet, and I have learned to be careful about what I wish for in terms of making changes. I mean, if Greenland wants to buy JDM vehicles, isn't that for the Danes to decide?
  • ToolGuy Once again my home did not catch on fire and my fire extinguisher(s) stayed in the closet, unused. I guess I threw my money away on fire extinguishers.(And by fire extinguishers I mean nuclear missiles.)
  • Carson D The UAW has succeeded in organizing a US VW plant before. There's a reason they don't teach history in the schools any longer. People wouldn't make the same mistakes.
  • B-BodyBuick84 Mitsubishi Pajero Sport of course, a 7 seater, 2.4 turbo-diesel I4 BOF SUV with Super-Select 4WD, centre and rear locking diffs standard of course.
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