Korean crisis threatens exports Currency woes hit state's traders
Puget Sound Business Journal, Friday, December 12, 1997 at 20:49
From Boeing to beef, Washington's exports to Korea are expected to
drop because of a currency crisis that has severely cut the buying
power of the Korean won, and undermined Koreans' confidence in their
economy.
In recent years, Korea has become Washington's second-largest
export market, after Japan.
"It's of real importance to the Northwest," said Bill Glassford,
senior vice president of international trade for Seafirst Bank, just
back this week from a fact-gathering trip to Korea. "All our sales
to Korea are going to be more expensive there."
On the export side, bankers like Glassford report heightened
concern among sellers about Korea's financial stability.
"Exporters are nervous, asking, 'Are we going to get paid?'"
Glassford said. "If anyone's selling to Korea, they want the bank to
confirm the letters of credit."
Last year Korea bought a record $2.9 billion in Washington-made
goods, up substantially from the $1.4 billion in 1991. While this is
less than half of the state's exports to Japan, it's $1 billion more
than Washington exports to China.
Exports to Korea probably will dip in 1998, and exporters around
the area are bracing themselves for the impact.
At The Boeing Co., for instance, aircraft ordered by Korean
carriers are among the approximately 60 ordered by Asian carriers
that could be delayed in the next three years. That's according to
Boeing's director of airline industry analysis, Gordon McHenry, as
quoted in a Bloomberg news article.
Meanwhile, Washington Wheat Commission CEO Tom Mick is
"cautious." In his Spokane office, he wonders what the impact on
Washington wheat exports to Korea will be.
The Korean market wheat market ranks second or third to Washington
wheat growers, with Koreans buying 37 million bushels of the state's
soft white wheat last year.
Noting that 50 percent of the wheat is used to make noodles, a
staple of the Korean diet, Mick is hopeful that sales won't dip too
much even if prices to Koreans climb. His concern is that Korean
buyers will look elsewhere for their wheat.
"They're going to need the same amount of wheat, but they're
becoming more price-conscious," he said.
Other commodity product sales also could be threatened, including
such things as hay, beef, seafood and processed potatoes, all areas
where the Korean market has strengthened in recent years.
Also concerned are local makers of value-added building products.
With Japan's economy stagnant, building products makers have been
looking to Korea for new markets. Korea's market is less fettered by
the regulations that have made exports to Japan difficult.
But Karri Anderson, sales manager for Pacific Housing Materials
and Design in Bellevue, said impacts are buffered by the fact that
most Korean buyers of Western houses are wealthy enough so that
they're less impacted by Korea's problems. "They're going to buy
anyway," he said.
Taking a longer view, some observers hope that the aftermath of
the devaluation may improve trading conditions with Korea, especially
in terms of Korea's notorious barriers to imports.
For instance, Korea has maintained a virtual ban on apples
exported from Washington, citing alleged insect pests they contend
will be brought in with Washington apples.
Cracking open the Korean market has become a major industry goal
for apple growers, and agricultural experts are watching the
situation closely. One possibility is increased pressure on Korea to
open its markets as a condition of economic help.
"Korea is a big market, has always been a politically difficult
market, and has put all kinds of obstacles in the way of exporting,"
said Desmond O'Rourke, director of the International Marketing
Program for Agricultural Commodities and Trade at Washington State
University.
"There could be some good coming out of it, if the IMF
(International Monetary Fund) does insist on general liberalization
as part of the cure," he said.
Bill Dallas, trade specialist for the Washington Department of
Agriculture, said he's been surprised at how rapidly the Korean
agricultural market has grown in recent years. He also believes that
IMF action will push markets open.
"The bottom line is, I think that companies that stay the course
will benefit in the long term," he said.
If the $55 million IMF bailout really does undermine the power of
the Korean conglomerates, called chaebols, that dominate the
economy, it also could open cracks where adroit Washington companies
can invest and expand.
"When they force these chaebols to be a little more focused rather
than dominating the economy, hopefully in five years, smaller
companies will find financiang that wasn't available. That will be
good," Glassford said. |
