The Korean export industry achieved the feat of surpassing $1 trillion in trade on Dec. 10, breaking the mark for the second consecutive year and joining the ranks of global top eight trade countries, knocking Italy down a notch.
“External trade uncertainties, including future developments of the global fiscal crisis and the direction of the new Chinese leadership’s economic policies, still linger, overshadowing the prospects of the Korean exporting industry,” says Han Jin-hyun, deputy minister for international trade and investment at the Ministry of Knowledge Economy (MKE). “However,” he said, “Korea’s economic capability, faring well compared to other countries, is expected to nudge up exports at a higher growth rate during next year than this year.”
The following are excerpts of an interview between NewsWorld and MKE Deputy Minister Han in which he spoke of the government’s trade policies and the effects of FTAs.
Question: Will you tell our readers about the trends of exports and imports Korea has posted so far this year?
Answer: This year has seen global trade dwindle due to the effects of the global economic recession. Global trade is on the decline since the second quarter of 2012. Seventy major countries saw their trading volumes rise 0.6 percent in March before plunging by 1.2 percent in April, 3.6 percent in June, 5.8 percent in August, and 3.7 percent in September. Korea’s major rival exporting countries also reported a reduction in their export volumes. Among them, Germany saw a decrease of 5.1 percent, Japan 5.3 percent, France 3.9 percent, and Taiwan experienced a drop of 0.5 percent for the first nine months of this year.
Despite the global trading uncertainties, the Korean exporting industry has fared relatively well. Korea has seen exports rise to 15.8 million tons in terms of trade volume in the first 10 months of this year, up 4.2 percent from 15.17 million tons during the same period of last year. Korea has seen its export decrease rate begin to slow down in the third quarter of the year before posting $47.1 billion in exports in October, up 1.1 percent over October 2011, the first period of growth in four months. Exports decreased 8.7 percent in July, 6.0 percent in August, and 2.3 percent in September before rising 1.1 percent in October and 3.9 percent in November, this year’s best performance with $47.8 billion in exports.
But the overall trade volume and trade balance for 2012 are expected to decline slightly compared to last year despite the turnaround in the fourth quarter.
Korea’s exports and imports surpassed $1 trillion at around 11 a.m. on Dec. 10, breaking the $1 trillion mark for the second consecutive year and joining the ranks of the global top eight trade countries, supplanting Italy. Korea, which ranked 13th between 2000 and 2002, rose to 12th between 2003 and 2006, 11th between 2007 and 2008, 10th in 2009, and ninth between 2010 and 2011.
Q: What’s the significance of Korea’s chalking up $1 trillion in trade in 2012 for the second straight year?
A: Korea’s surpassing the $1 trillion trade mark in 2011 was a milestone in which Korea joined global economic and trade powers thanks to the results of Korean people and companies’ 50 years of economic development with a challenging spirit.
Despite the global trade decline, caused by the global economic recession, it is significant for Korea to surpass the $1 trillion mark in exports and imports this year for the second straight year, albeit later than last year. Seventy trade countries saw trade edge up 0.6 percent in March before declining 1.2 percent in April, 3.6 percent in June, 5.8 percent in August, and 3.7 percent in September. Korea has seen trade volume rise 4.2 percent between January 2012 and October 2012 over the same period of last year. The comparable trade figures during the January-September 2012 period are a decline of 5.1 percent for Germany, a 5.3 percent drop for France, a 3.9 percent fall for Taiwan, and a 0.5 percent decline for Japan, whereas China saw trade surge 7.4 percent.
In particular, amid unfavorable external uncertainties and hardships, Korea has joined the group of the global eight trade powers for the first time, beating Italy. Korea posted $797.9 billion in trade for the first nine months of this year to rank eight following the United Kingdom. The Korean trading industry has achieved tremendous growth as the nation, which ranked 13th in 2002, rose to eighth place in only a decade.
Q: What are the characteristics and factors that led to Korea’s achieving more than $1 trillion in trade in 2012 for the second straight year?
A: The top four factors for repeating Korea’s feat of surpassing the $1 trillion trade mark and joining the top eight trade powers are the nation’s effective utilization of free trade agreements, SMEs’ making a strong showing, the expansion of new markets, and the diversifying of export items.
The beneficiaries of FTAs with the United States and the EU have fared well, contributing to buttressing our exporters’ activities in the sagging U.S. and the EU markets. Korea’s exports to the United States rose 5.8 percent in the first 10 months of this year over the same period of last year, whereas the automotive parts and ordinary machinery sectors, the beneficiaries of the Korea-U.S. FTA, surged 14.8 percent and 21.4 percent, respectively. Korea saw its exports to the EU market decline 11.5 percent during the same period of this year while automotive parts and petrochemical products, the items subject to a customs reduction following the implementation of the Korea-EU FTA, rose 2.3 percent and 12.3 percent, respectively.
Large-sized companies saw their exports decline 2.4 percent during the January-September period, and SMEs saw exports increase 3.2 percent for a 1.6 percent drop overall.
The nation’s strategies to diversify markets have paid off: A drastic slump in the EU market was offset by a rise in exports thanks to the expansion of new markets. A provisional tally for the period between January and November 2012 showed that Korea saw exports to the EU, Central and South America, Japan, and China drop 11.7 percent, 7.5 percent, 0.5 percent, and 0.1 percent, respectively, whereas the nation saw overseas shipments to ASEAN countries, the Middle East, the CIS (Common wealth of Independent States), and the United States soar 10 percent, 13.8 percent, 9.4 percent and 4.8 percent, respectively.
Export items have been diversified. Heavy electric machinery, cosmetics, and new items other than the conventional mainstay products have made a strong showing, offsetting a slump among some items. A provisional tally of mainstay items in the first 11 months of this year showed that petrochemical exports soared 9.8 percent and automotive parts increased 7.2 percent, while ships plummeted 29.2 percent and mobile telecom devices plunged 29.2 percent. A provisional tally of new hit products for the January through October period showed that electronic applied devices jumped 53.6 percent, heavy electric machinery soared 53.6 percent, cosmetics increased 20.4 percent, and rubber items rose 12.2 percent.
Q: Will you comment on 2013 external trade conditions and export and import forecasts?
A: Uncertainties threatening the Korean exporting industry loom large, including the global fiscal crisis, China’s slowing economy, the spread of protectionist trends, and advanced countries’ quantitative easing. On the other hand, favorable conditions, including advanced countries’ resurging demand for durable items, signs of the recovery of the U.S. and Chinese economies, and the effects of the FTAs are forecast to have a positive impact on the exporting of Korean items.
In consideration of the aforementioned factors, major research institutes have released reports predicting the 2013 trade growth rate ranging from 3.2 percent by the Korea Development Institute (KDI) to 8.0 percent by LG Research Institute for an average of 5.8 percent. The 2012 trade surplus is forecast to range from $18.8 billion by LG Research Institute to $35.5 billion by the KDI.
External trade uncertainties, including future developments of the global fiscal crisis and the direction of the new Chinese leadership’s economic policies, still linger, overshadowing the prospects of the Korean exporting industry. Korea’s economic capability, faring well compared to other countries, is expected to nudge up exports at a higher growth rate during next year than this year.
Q: What are the benefits and disadvantages Korean exporters face in the implementation of FTAs?
A: It is easy to jump to conclusions since little time has passed since the implementation of the FTAs with the United States and the EU. The beneficiaries of the FTAs are considered to serve as a buttress to make up for declines in the sagging markets. The Korean exporting industry saw exports to the United Sates rise 4.2 percent overall -- the beneficiaries of the KORUS FTA, which went into effect this past Sept. 14, soared 13.9 percent and non-beneficiaries dropped 1.5 percent. Korean exports to the EU plunged 11.1 percent overall -- the beneficiaries of the FTA between Korea and the EU, which went into force this past Aug. 31, surged 14.2 percent and non-beneficiaries dived 29.2 percent.
Signatories of the KORUS FTA and Korea-EU FTA are found to have win-win effects, including a rise in mutual trade volume.
If the government and the private sector join forces in the utilization of FTAs, the FTAs are likely to have positive effects on Korean exporters in the long-term.
Q: What government support steps are in place to overcome a slump in the Korean exporting industry?
A: As part of steps to brace for external hardships, including the prolonged Eurozone fiscal crisis, the government began to take steps to boost exports in the short-term, starting the second half of the year, revolving around field-oriented marketing and the expanding of trade finance support programs. The government poured an additional 8 billion won into support to Korean exporters’ marketing activities in Korea and abroad. It also ramped up trade finance support to 200 trillion won in 2012, up from 190 trillion won in 2011. Trade finance amounts for SMEs with low credit ratings have increased to 32 trillion won this year, up from 30 trillion won in 2011.
We’re devoting ourselves to nurturing SMEs into up-and-coming exporters as well as medium-size stalwarts into global companies.