President’s resolve: 'We must strengthen national power'

Lee Sang-ryeol

The author is a senior editorial writer at the JoongAng Ilbo.

“We must strengthen the nation’s power.”

President Lee Jae Myung made this remark at a workshop for senior government officials after concluding tariff negotiations with the United States. Washington, he noted, pressed Seoul hard without showing the least courtesy a 70‑year ally could expect. The New York Times went so far as to describe the approach as “global extortion.” While the new reciprocal tariffs of 15 percent match the rates for Japan and the European Union, the de facto nullification of the zero‑tariff Korea‑U.S. FTA is a painful setback.

Lee’s blunt remarks can polarize audiences. But in this case, many Koreans likely shared the president’s sentiment. His statement also raised the question: How is national power built? At its core lies economic strength, and much of that rests on the vitality of private enterprise.

The recent negotiations offered a clear example. Korea’s shipbuilding industry served as an important bargaining chip. Washington, locked in a rivalry with Beijing, leaned on Seoul for shipbuilding cooperation because the U.S. shipbuilding sector has collapsed. Overprotectionist measures such as the Jones Act, which allows only U.S.‑built vessels to operate in domestic shipping, entrenched a high‑cost, low‑productivity structure that ultimately drove U.S. shipyards out of business. The lesson is straightforward: Strong companies are the foundation of national power.

Yet the government’s policy direction since the negotiations appears to run counter to that principle. Taxes are being raised, regulations are tightening, and the combination threatens corporate competitiveness.

Korean companies already carry heavier corporate tax burdens than many competitors. Including local taxes, the top corporate tax rate is 26.4 percent, 2.5 points above the 2024 average of 23.9 percent among Organisation for Economic Cooperation and Development members. Corporate tax as a share of GDP was 3.6 percent in 2023, compared to 2.4 percent for the Group of 7. Japan stands at 3.1 percent, Germany at 0.7 percent and the United States at 1.5 percent. Korean companies now face tariff pressures abroad and corporate tax burdens at home.

At the same time, the government has begun distributing 13.8 trillion won ($9.9 billion) in consumption vouchers nationwide, only to follow with corporate tax hikes. The old saying that farmers never consume their seed grain feels forgotten.

In the National Assembly, the majority Democratic Party is pushing to pass a tougher commercial law revision alongside the so‑called Yellow Envelope Act. The revised commercial law threatens corporate control structures, while the labor bill could destabilize labor‑management relations. Key provisions would allow subcontracted workers to demand negotiations directly with primary contractors and classify restructuring or mergers as legitimate grounds for strikes if they affect working conditions.

Large Korean companies operate vast ecosystems of hundreds or even thousands of subcontractors across multiple tiers. In practice, this could require primary contractors to negotiate hundreds of times a year with lower‑tier unions. Even decisions to build overseas factories could trigger collective action. The law would clearly shift power toward labor. At this stage, warning lights are flashing for normal corporate operations, and concerns from the U.S. and European chambers of commerce in Korea about potential market exits are not unfounded.

The impact on smaller subcontractors and workers may not be entirely positive. Large firms will be reluctant to work with subcontractors deemed to carry high strike risks, potentially creating informal “blacklists.” For some subcontractors, losing contracts could lead to bankruptcy and job losses, delivering a harsh blow to those already in weaker positions.

The government has described itself as a “pragmatic market‑oriented” administration, yet many now question what that means. So far, its policies appear worker‑friendly but hardly business‑friendly.

Barely two months into the Lee Jae Myung administration, conditions are emerging that make strikes easier and business operations harder. Companies are under growing strain, and one reality remains clear: Without strong, competitive enterprises, building national power will be an uphill battle.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.