In a speech given on July 30 at the Center for American Progress, U.S. Export-Import Bank Chairman Fred Hochberg discussed American competitiveness in an age of increasing overseas competition and government support of chosen national champions. He argued that the U.S. must change its strategy when its competitors are playing by completely different rules. While this may be true, Hochberg seems remarkably shortsighted in his characterization of which countries present the greatest danger to U.S. exporters.
Hochberg singled out a handful of countries that “are a very serious threat to US competitiveness”: China, Russia, Brazil, Korea, and Japan. He noted that last year, Korea increased its total export financing to almost $64 billion – almost twice that provided by the U.S., even though Korea has a GDP more than thirteen times smaller. According to the chairman, Korea’s Export-Import Bank has told buyers that, “it is plenty willing to dramatically expand financing in the future and will do whatever it takes to win those sales.”
Yet another country maintaining support to its exporters as a key agenda item does not necessarily mean that that country is providing unfair support. Korea has been a member of the OECD – which has strict rules regarding export controls – since 1996. Therefore, there is nothing inherently unfair about the support Korea provides to its exporting businesses; the Korean government is simply more committed to supporting its exporters than Washington is.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
Hochberg also discussed the export of nuclear power plant construction at length. He argued that U.S. giant Westinghouse was a superior provider of such plants and each construction contract would provide America follow-on services and jobs for 50 years. As he later noted, Westinghouse is 67% owned by Toshiba, a Japanese company – yet, he maintains that Japan is one of the great threats to U.S. export competitiveness.
The UAE has awarded construction of the $20 billion Barakah Nuclear Complex to South Korea, which was competing for the contract against France and a Japanese-U.S. partnership. According to UAE government officials, Korea was given the contract because its proposal offered the highest safety standards, met the strict commercial requirements that the first plant would be finished in 2017, and was also the cheapest.
That Korean consortium includes Westinghouse, which will be given contracts for equipment, engineering, and fuel-service. An estimated 5,000 jobs across 17 states will be supported by the UAE project, with an estimated $2 billion in business to U.S. suppliers. South Korea also supplies many major components for the current U.S. reactors under construction as well as those under consideration.
Additionally, most of Korea’s reactors, including all of those it is currently building, planning, and exporting, are based on U.S. technology. Cooperation in nuclear power projects has led to billions of dollars in U.S. business. Because Korean nuclear plant construction relies on US technology and partnerships, contracts won by Korea result in U.S. business. The U.S. retains export controls over the technology used by Korea, meaning that it has a direct role in ensuring non-proliferation and safety issues.
Korea also plans to compete in the operations, maintenance, and repair market – and again, because Korea uses U.S. technology, this will further positively impact U.S. businesses and jobs. The Heritage Foundation, a conservative think tank, noted that Korea’s nuclear exports expansion “could lead to $80 billion in U.S. exports.”
It seems clear that Korea is not, as Hochberg argued, “A very serious threat to U.S. competitiveness.” Beyond the economic cooperation between Korean and U.S. nuclear power plant construction companies – and the free trade agreement that has been in effect for a year, further contributing to economic development for both sides – there is the greater issue of geopolitics. Korea has been a close ally of the U.S. for more than 60 years and, along with Japan (ostensibly another “very serious threat”), is a crucial cornerstone of the U.S. strategic rebalance to the Asia-Pacific. Approximately 28,500 U.S. military personnel are stationed there. The U.S. and Korea maintain significant security cooperation in a region that is increasingly unstable, with territorial disputes abounding and North Korean nuclear and missile developments continuing unchecked.
The fact that Korean companies are competing in a global market does not automatically make the country a threat to the U.S. – and it is worrying that the chairman of the U.S. Export-Import Bank seems convinced otherwise. The symbiotic and expansive nature of the U.S.-Korean political, economic, and security engagement means that single issues should not be taken out of context or blown out of proportion, especially given the greater geopolitical and strategic environment. We must realize that when Korean companies win – as in the nuclear power construction business – U.S. companies, as well as national security, can also benefit.
Ashley Hess is a Kelly Korean Studies Fellow at Pacific Forum CSIS.