Time for New Paradigm
Since the trade surplus already reached US$83.2 billion (97.97 trillion won) at the end of November, the overall figure this year is highly likely to be a record high. However, it is the recession trade surplus, which is achieved by the further decrease in imports than exports, so it is not so welcome. The problem is that sluggish exports came from structural issues, not the temporary state, and its aftereffects are not limited to only export companies.
Much concern is being voiced that “Export Korea” will fall into the prolonged recession if the trend continues. Since emerging countries, including China, are hot on the trail and narrowing the gap with Korea, Korea will have no place in the global export market with low priced products, which are made with general-purpose technologies.
External conditions are also tough. Due to rising U.S. interest rates, a slowdown in the Chinese economy, a prolonged recession in Europe and a slump in the market of raw materials, including oil, emerging countries also show a severe recession. The Korea-China FTA has come into effect after many complications. However, there are doubts over how long the preoccupancy effect of the FTA will last since the Trans-Pacific Partnership (TPP), centering on the U.S. and Japan and excluding Korea, is being accelerated.
Export has declined in importance of the national economy and the large and sound domestic market, which is not greatly affected by external factors, is becoming more important. However, export is still the biggest growth engine and the source of jobs. President Park Geun-hye has attended the Trade day of Korea every year after her inauguration. At the event this year, she presented specific measures to boost exports again, such as the creation of new added value by integrating manufacturing and IT industries, Hallyu marketing strategy combining with cultural events and lower barriers to e-commerce.
Economic industry sources and exports also agree that Korea should change its export strategy. According to a report called “Open New 4.0 Era for Korea’s Export” released by international trade analysts at the KITA, Korea’s trade industry should seek to change the paradigm in order to create added value and employment through economic activities abroad.
The report argued that the concept of exports should be changed from quantities to added value first. The percentage of added value created in Korea out of its total exports stood at 58.3 percent as of 2011, showing the lowest figure among the 10 biggest exporting countries in the world. Therefore, it is important to secure the nation’s own production elements, including “knowledge-based assets” which are difficult to move to other countries and imitate.
Main export products should be changed as well. The period to keep Korea’s 10 main export items, such as steel, automobile, semiconductor, vessel and synthetic resin, is 22 years on average. The report said Korea should promote technology and idea intensive industries, including pharmaceuticals, medical device, IT and business service, new material and aerospace, and luxury consumer goods integrating Hallyu and idea, rather than labor intensive items, in the future.
Moreover, the analysts urged that startups, which are spreading around the world, should pursue a “born global” strategy, which aims for the global market, rather the domestic market, from the early stage. In addition to the domestic production system, it is also crucial to diversify export methods, including the no-factory manufacturing industry and B2C export through e-commerce. Kim In-ho, chairman of the KITA, said, “Instead of blaming the international economic environment, we hope that Korean export companies rearm with the global entrepreneurship, which reads the global economic trend, and use wisdom and courage to take it as an opportunity to strengthen the competitiveness.”