EXPORTS are quite a significant element of the Korean economy.
Korean exporters play a big role in helping the Korean economy stay competitive and healthy. Some even say that Korea is one of the most remarkable export-oriented economies in the world. However, when the Korean government was established in 1948, Korea’s trade volume ranked around 100th in the world. Korea’s exports and imports in 1950 stood at US$29 million and US$48 million, respectively. Korea’s exports reached US$10 billion in 1977 and US$100 billion in 1995. From 1986 to 1989, Korea enjoyed trade surpluses for four years in a row. In 1998, when Korea suffered from a financial meltdown, the nation overcame the crisis by posting a trade surplus.
According to a report by Thomson Reuters Datastream, the world’s largest financial statistical database, as of the end of November, Korea remained one of the global top 10 exporters. Korea ranked ninth, just below Belgium and ahead of the United Kingdom. Over the first nine months of 2009, Korea’s exports dropped 20.9% from the same period of the previous year; the average rate of decline for the top 15 exporters was 27.8 percent. Korea inked the fifth-largest trade surplus, after China, Germany, Russia and the Netherlands.
Korea’s monthly exports have increased at an average rate of 6.2 percent since January, recording US$34 billion in September; the corresponding figures for the United Kingdom and Canada were 2.2 percent and 0.8 percent, respectively. One factor behind these impressive figures is Korea’s strong performance in key export items such as IT products, LCDs, ships and automobiles. This year, Corporate Korea enjoyed the biggest share in the world’s shipbuilding, semiconductor, LCD and flat TV markets. In the wireless handset market, Korea ranks second, while in the automobile market it is currently ranked fourth.
Although Korea did post a decrease in exports this year, its drop of 20.9% is relatively smaller than those of its rivals. For example, Germany and China recorded drops of 30.2% and 21.3% in exports, respectively. The U.S. saw its exports slide by 23%, while Japan’s exports fell 32.9%. So Korea is highly likely to join the world’s 10 biggest export powerhouses of 2009. In addition, its trade surplus is expected to reach US$40 billion, the highest-ever volume in the history of Korea’s trade. It is forecast that Korea’s exports are expected to increase 13.3% to US$410 billion in 2010. This is because the world economy is expected to turn to a recovery and the prices and volumes of Korea’s exports are expected to rise. Countries with rich natural resources are also expected to expand their imports. Therefore, Corporate Korea is expected to post double-digit growth in 2010. Most of Korea’s main export items, except for ships, will enjoy increases in exports next year. By market, Korea will enjoy strong exports to developing countries such as China, ASEAN, the Middle East, and Central and South America.
In the meantime, Korea’s imports are projected to rise 19.6% to US$385 billion in 2010 thanks to a recovery in the Korean market and base effects. Its oil exports are expected to increase by US$17 billion from 2009. Korea’s trade surplus in 2010 is expected to stand at US$25 billion.
However, Corporate Korea needs to overcome some obstacles in order to continue to promote its exports in the rapidly changing world trade environment, according to recent analyses by the Korea International Trade Association (KITA). First of all, strong protectionism is facing Korean exporters. This trend is also expected to continue in 2010. Even though, heads of states at the G20 Meeting vowed not to resort to protectionism in 2009, each country has adopted various protectionist measures for its industry. As the world economy is not expected to recover fast in 2010, it is feared that it may suffer a double- dip phenomenon. Therefore, protectionism will be prevalent in the world trade environment.
Second, global warming and climate change are creating more and more environmental regulations. In particular, advanced countries now require products to be more environment-friendly. Accordingly, Korean companies should produce environment-friendly products and move into the low-carbon green economy to stay competitive globally. In addition, with a reduction in global oil reserves, the prices of energy resources are expected to rise on a long-term basis. These higher energy prices will cause consumer prices to rise and the Korean economy to suffer trade losses.
On the world trade front, fiercer competition is awaiting Corporate Korea in 2010. Korea will continue to fight an uphill battle with its competitors in 2010. According to trade experts, Korea has been sandwiched between advanced nations such as the U.S., Japan and the EU and new emerging nations, such as Brazil, China, Russia, and India. In particular, the U.S. is actively taking part in the world trade war while keeping its greenback weak to solve its trade deficit problem. A weak U.S. dollar strengthens the price competiveness of U.S. products in the world market. KITA analyzed that Korea needs to sign and utilize more free trade agreements to develop better opportunities and more foreign markets as well as deal with exit strategies and a hike in the interest rates of countries around the world. In particular, exit strategies and a hike in interest rates are expected to play the role of a wet blanket against recovery in world trade in 2010.