![]() ![]() But a nationwide anti-consumption drive turned the boom to bust. Sales boomed in the fourth quarter last year to about 500 cars. The demographics in South Korea-with its new yuppie class-looked good to Ford Motors, which proceeded to sign a distribution deal with Kia Motors Corp. “The primary accomplishment of ‘liberalization’ in Korea has merely been to bring into play a vast array of other non-tariff trade barriers which affect both the supply and demand of imported consumer goods.” “When all is said and done, Korea’s trade ‘liberalization’ has had a minimal effect on trade because the Korean rules of the game are designed to keep imports out of the Korean market,” the Chamber of Commerce said. Whether it is government sponsored or not, the anti-consumption campaign has “served no purpose other than to increase the anti-foreign bias of an already difficult-to-crack market,” the American Chamber of Commerce in Korea observed in a pamphlet it published last month. Reports of the campaign against conspicuous consumption have raised alarm in Washington where there is concern that South Korea may be backtracking on a commitment to liberalize its markets through steps such as reducing tariffs and abolishing quotas. “The government is very definitely blocking the import of luxury goods, but we’ve decided it’s not worth taking steps because the amount is peanuts compared to total trade. “It’s a very efficient way to discourage consumption of imported fashion brands,” the French official said. No such rule applies to clothing made in South Korea. Now stores must mark the garment’s landed price and its retail price, showing consumers the markup. “The whole aura has damaged confidence that a quality product will succeed on its own merits in this market.”įor example, the government changed regulations on tagging for imported clothing, noted an official with the French Embassy in Seoul. “At this particular moment you have to be extremely careful about selling in Korea,” said Ford’s Patrick. The trade balance was in the black, too, with a $518-million surplus, according to the Bank of Korea.īut there have been few signs that the mood of austerity will lift its constraints on consumers. The current account moved back into surplus-$524.9 million for the month-after six consecutive months of deficit. Recently released figures for July suggest a rebound. Auto exports were down by 37.5% during the first five months of the year, partly because labor disputes had put a dent in production. Imports were up 11.5% from January through June, while exports remained flat, leading to a trade deficit for the half-year of $2.8 billion-following four straight years of trade surpluses. Overall, trade and current accounts balances look bad this year. Indeed, the Trade Ministry noted that luxury goods constitute less than 3% of South Korea’s total imports, the vast majority of which are raw materials and machinery that feed the country’s export industries. ![]() That means money goes out of the country.” They’re not hurting the economy, and if Koreans don’t buy the goods here they’ll get them in Hong Kong or wherever. ![]() “Luxury goods may be seen as part of an import invasion, but in dollar terms their share is negligible. “My business has been greatly hurt by social pressure,” said the importer, who spoke on the condition of anonymity. All the orders were canceled.Ī South Korean importing European designer brands complained of being forced by “government pressure” to close two of four shops because they were “too noticeable.” Sales are flat at the remaining outlets. One by one, the customers were contacted by telephone and told their tax filings would be investigated if they went through with the purchase, said the diplomat, who asked not to be identified. Yet one Western diplomat cited a typical example of apparent “moral suasion.” A government official got hold of a list of 200 South Koreans who had placed orders for a European luxury car, he said. “The government has in no way encouraged or instigated this movement.” “This problem is entirely confined to the private sector, which has launched an austerity campaign in response to the frivolous and extravagant life styles of the upper class,” a Ministry of Trade and Industry report declared in July. The government denies any meddling in the market. “There have been insinuations in the media that the government would audit the taxes of people who bought luxury items or imported cars,” Patrick said. Kia showrooms across the country sold only 88 Fords in July. Monthly sales were cut nearly in half in April. Then an “anti-consumption” campaign got off the ground, Patrick said, and the Sable was one of its victims. “We all thought this was peaches and cream,” said Allen Patrick, vice president for Ford International Business Development and head of Ford’s operations in Seoul. ![]()
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