Measures Needed for Supply Network Stabilization

The Korea International Trade Association (KITA) has pointed out in a report that the degree of dependence on intra-industry trade is on the increase between South Korea and Asian economies such as China and Vietnam and South Korea should prepare strategies for global supply network stabilization.

According to the association, South Korea’s dependence on intra-industry trade reached 42.7 percent in terms of total exports last year. The figure continued to rise for 11 years from 31.8 percent.

Intra-industry trade can be defined as simultaneous import and export of similar goods in the same industry. The examples include South Korea exporting and importing semiconductor chips to and from China. An expansion of intra-industry trade leads to more rapid reflection of overseas market changes in domestic markets, which means an increasing importance of supply network management.

The association explained that the dependence of South Korea was as high as 39.6 percent, 32.8 percent, 25.1 percent and 20.7 percent in relation to China, Japan, Vietnam and the United States, respectively. The figures in relation to Vietnam and China in particular jumped 16.8 percentage points and 8.9 percentage points from 2012 to 2019, respectively. “The intra-industry trade vis-à-vis Vietnam and China showed a rapid increase mainly in the electrical and electronics sectors, in which South Korea imports low-price products from them and exports high-price products to them,” it said, adding, “The high degree of reliance may lead to more supply network risks and plans should be prepared for closer monitoring and supply network stabilization.”