Shift in Trade Weight
The focus of Korea’s international trade is shifting from “export to the U.S. and import from Japan” to “both export and import to and from China.” This is likely to become even more conspicuous once the Korea-China FTA takes effect.
According to the Ministry of Trade, Industry and Energy and Statistics Korea, Korea’s exports to Japan for the first nine months of this year totaled US$24.44 billion, which was equivalent to 5.7 percent of its total exports for the same period. The percentage is a record low since 1966. During the period, China and the United States accounted for 24.9 percent (US$106.1 billion) and 12.0 percent (US$51 billion) of Korea’s exports, respectively.
Korea’s exports to Japan have been on the decline for a while. The ratio had been as high as 36.8 percent in 1973, but dropped all the way down to 9.3 percent in 2002. In addition, the rate of increase has been at negative 2.2 percent, negative 10.7 percent, and negative 4.6 percent in 2012, 2013, and the first three quarters of this year. Korea’s imports from Japan decreased by 5.8 percent in 2012, 6.7 percent in 2013, and 11.1 percent between January and September this year, too. This can be attributed to Korea’s efforts for FTA-based trade partner diversification for the past 10 years, the recent deterioration of the bilateral diplomatic relations and the current weak yen.
It is the tourism industry that has been affected the most. This year, the number of Japanese tourists visiting Korea declined 14 percent from the previous year to 1.74 million. But that of Koreans visiting Japan showed no meaningful change.
In the meantime, the Korea-China FTA is expected to result in China’s increasing role in Korea’s international trade relations. The ratio of exports to China had been limited to 3 percent immediately after the establishment of diplomatic relations in 1992, but increased rapidly to 17.7 percent in 2003 to catch up with that of exports to the United States. More recently, the percentage has reached 25.8 percent last year and 24.9 percent this year.