So much has been happening in DC! [Hillary hurting her elbow?! Hope she gets better soon!] There was the financial overhaul which included the death of the OTS, the scramble to cut costs from the health plan, the passage of the War Bill which included IMF funds, and the approval of the energy bill.
Today I went to the Korea Economic Institute for a panel lecture. The speakers were James Lister [VP of KEI], Minister Counselor Han [Korean Embassy], Subir Lall [IMF], and Leif Eskesen [IMF].
The IMF economists talked about why the fall of Lehman had such a profound effect on Korea's economy, even though its Korea's banks were relatively unexposed to bad derivatives. Korea is one of the most open economies in the world, and when investors pulled their money out of Korea, banks began to roll over their debt, and Korea was faced with a liquidity problem. Korea's economy is also heavily dependent on exports, and as global demand weakened, the volume of exports from Korea decreased.
But not to worry! Korea’s government reacted quickly and forcefully in order to prevent massive de-leveraging and subsequent adverse effects. It took measures to keep Korea’s banks highly capitalized, eased monetary policy, and increased fiscal stimuli as cross-border financing tightened. Although Korea recorded an economic contraction in Q4 of 2008, it recorded an expansion the following quarter, while many other advanced countries continued to contract. However, private demand must eventually take the place of fiscal spending, and Korea's economic recovery is largely dependent on a global economic recovery.
Minister Counselor Han then spoke about the benefits of the KORUS Free Trade Agreement and how the U.S. and Korea need to commit to free trade, especially during an economic downturn when protectionist policies can be particularly detrimental. Contrary to popular belief, the U.S. auto sector has much to gain from the KORUS FTA. KORUS FTA attempts to further level the playing field for U.S. made autos in Korea. Korea agreed to eliminate its 8% tariff on U.S. passenger cars immediately and to reduce non-tariff barriers to U.S. exported cars. Korea has also agreed to a “snap-back” policy which allows the U.S. to reinstate tariffs on Korean cars if Korea fails to uphold its commitments under KORUS FTA. Despite these conditions, the agreement continues to face opposition by many American carmakers.
M.C. Han pointed out that about 30% of the 675,139 Korean nameplate vehicles sold in the U.S. were produced within the United States, increasing employment in those regions where manufacturing plants were built. For example, the Hyundai plant in Alabama is a $1.4 billion investment that has created about 3,300 new jobs. The Kia plant in Georgia is a $1.23 billion investment that is predicted to generate about 2,500 new jobs.
He then held up this picture. That sign is on a lawn in Georgia.
Anyway, I got to ask Leif Eskesen questions later, and he was so nice! Maybe I should tell DJ Nabs to be friends with him.