Weakened Competitiveness
The Korea International Trade Association announced on November 28 that the trade surplus South Korea recorded in its top 10 export destinations totaled US$91 billion for the first 10 months of this year, 11.4% less than a year ago. During the same period, South Korea’s trade surplus declined more rapidly than its total exports, which showed a decrease of 8%.
Last year, South Korea posted a trade surplus of US$124.3 billion in its top 10 export destinations along with a total trade surplus of US$90.2 billion. This can be attributed to a rapid drop in oil prices, which resulted in a decline in South Korea’s trade deficit with oil producing countries. For reference, South Korea’s total trade surplus had stood at US$47.1 billion in 2014. Such an improvement based on low oil prices did not last long though due to intensifying competition in the United States, China, the ASEAN region, etc.
South Korea’s exports to China between January and October this year totaled US$100.7 billion, 12% less than a year earlier, while South Korea’s trade surplus with China fell 24% from US$39.3 billion to US$29.8 billion. During the period, its exports to and trade surplus with the United States fell by 5.9% and 7.5%, respectively. The respective figures fell 13.6% and 15.1% in the nine ASEAN member countries excluding Vietnam, where South Korean companies are running a number of manufacturing facilities. This has to do with China’s increasing shares in the ASEAN steel, telecom equipment, electronics markets and the like. Besides, South Korea’s exports to and imports from Japan are decreasing and increasing, respectively.
What is worse is that trade regulations are being tightened in the major markets. As of the end of last month, South Korean companies were subject to a total of 183 import regulations, including 13 in China, 23 in the United States and 33 in India. The number of such regulations in the United States increased from 19 to 23 between the end of last year and October this year and is likely to keep going up in the Donald Trump administration.
Under the circumstances, 77% of 250 South Korean manufacturers answered in the Bank of Korea’s recent survey that their business conditions would show no improvement at all next year. In the Korea International Trade Association’s survey, more than 63% of 1,125 exporting companies said that South Korean companies are not more competitive than foreign ones.