$25 Bln Trade Surplus Projected for Next Year

Korea-U.S. FTA would expand Korea’s exports by roughly $1.33 bln

The nation is predicted to see its total annual trade surpass the $1 trillion barrier for the first time in its history. The following are excerpts of an interview between NewsWorld and Han Jin-hyun, director general for trade at the Ministry of Knowledge Economy (MKE), who focused on free trade agreements and trade promotion policies, on the occasion of the anniversary of Trade Day on Nov. 30.
Question: Will you tell our readers about the accumulative volume of exports the nation has delivered abroad so far this year and the 2010 trade forecast?
Answer: The nation posted $424.3 billion worth of exports during the first 11 months of this year, a 29.5 percent surge from the same period a year ago, and $385.2 billion worth of imports, a 32.8 percent jump, to rake in a $39.1 billion trade surplus.
The robust trade performance was owed to a rise in the portion of semiconductor and other materials and parts exports to more than 50 percent of the total, China’s 20 percent share of Korea’s overall exports and the expansion of emerging markets. The portion of semiconductor and other materials and parts exports increased from 43.5 percent in 2008 to 47.0 percent in 2009 and 49.6 percent during the first 10 months of this year. Meanwhile, the percentage of Korea’s export items to China rose from 21.7 percent in 2008 to 23.9 percent and 24.9 percent during the January-October period this year.
By item, Korea saw semiconductor exports shoot up 47.4 percent in the first 10 months of the year over the same period last year; automotive parts surged 70.0 percent; automobiles climbed 44.3 percent; and petrochemical products increased 38.2 percent. The nation’s portion of exports to emerging markets rose during the January-October period of this year ― a 47.4 percent surge to Central and Southern America, a 38.3 percent increase to China and a 25.5 percent rise to Africa.
Korea saw its ranking among global exporting countries rise two notches from ninth place in 2009 to seventh place during the January-September period of 2010, ranking among the global top eight exporters for the first time. The nation’s share in the global export market shot up from 2.95 percent in 2009 to 3.11 percent in the first half of 2010, breaking the 3 percent barrier for the first time. Korea is forecast to export $465 billion worth of items during the whole of 2010, up 27.9 percent over 2009, and to see imports reach $424 billion, a 31.2 percent surge for a $41 billion trade surplus.
Q: What are the top 10 exported items?
A: The top 10 exported items are semiconductors, ships, general machinery, petrochemicals, automobiles, petroleum products, liquid crystal devices, steel products, mobile telecom gadgets and automotive parts. In particular, semiconductors have grown into the biggest exported item due to an increase in its prices, caused by a rise in the global demand for PCs and smartphones.
Q: Will you elaborate on the current status of the free trade agreements (FTAs) Korea has signed so far and what impact they will have on Korean exports?
A: Korea is the sole G20 country to have signed FTAs with both the United States and the European Union. Korea has so far completed eight FTAs and is in negotiations over seven others. From a short-term perspective, the signing of an FTA could boost exports, thus creating more jobs, while from the mid- and long-term perspectives, it would advance economic fundamentals, thus improving country risks and expanding foreign direct investments.
The signing of FTAS will have a different impact on exports, according to the industrial division structure of signatory partners. For instance, Korea’s signing of an FTA with the United States would boost exports in automobiles, textiles, electronics, machinery, steel, chemicals, household instruments and other industrial fields. The Korea Institute for International Economic Policy and 10 other research institutes estimated in April 2007 that Korea’s FTA deal with the United States would expand the former’s exports to the latter by roughly $1.33 billion per year for an annual trade surplus of $745 million. In particular, such fields as textiles and electronics are the biggest beneficiaries of expanded trade surpluses and production. The delayed removal of tariffs on automobile exports to the United States was a key part of the latest negotiations, but the Korean automobile industry would boost its exports by $810 million per year by strengthening its competitive edge and expanding its automotive parts exports.
Now that we have wrapped up FDAs with such advanced markets as the United States and the EU, we plan to focus on negotiating FTAs with emerging markets and countries rich in resources.
Q: What’s your forecast for trade in 2011?
A: The global economy is predicted to see growth drop a little bit due to the slowdown of advanced economies, but it will maintain steady growth. The International Monetary Fund forecast that the global economy will grow 4.2 percent in 2011, down from 4.8 percent in 2010; advanced economies will advance 2.2 percent, down from 2.7 percent, and developing economies will see 6.4 percent growth, down from 7.1 percent.
Despite worries over the slowed growth of advanced economies, international crude oil prices are forecast to rise in tandem with increased petroleum consumption, influenced by the weak dollar following the quantitative easing measures by the U.S. Federal Reserve.
The exchange rate of the Korean currency against the dollar is expected to be more volatile with a mix of factors weakening the won, including the possible reoccurrence of the European fiscal crisis and Korea’s geopolitical risks, and others strengthening the Korean currency including the quantitative easing of the dollar and the appreciation of the yuan. The nation is predicted to see exports surge 10.3 percent over 2010 to $513 billion in 2011 and imports are expected to climb 15.1 percent to $488 billion for a $25 billion trade surplus. Export and import growth rates are expected to be lower next year due to the base effect, but should still post in the double digits, while the trade surplus is forecast to be lowered. The overall amount of trade is projected to surpass the $1 trillion barrier for the first time in 60 years after it broke the $100 million mark in 1951. Korea saw trade surpass $10 billion in 1974, $100 billion in 1988 and $500 billion in 2005.
Eight advanced economies ― the United States, Germany, China, Japan, France, Italy, the UK and the Netherlands ― have already seen their overall trade top the $1 trillion mark. They took an average of 26.4 years and 8.4 years to go from $100 billion in trade to $1 trillion in trade as well as from $500 billion to $1 trillion. The figures for Korea are 23 years and six years, respectively.
Q: Will you introduce the top five exhibitions each of Korea’s convention centers will hold during next year?
A: COEX will be the venue of SEMICON Korea 2011, slated for Jan. 26-28; Seoul International Fair for Mother & Baby, Feb. 17-20; Korea International Medical & Hospital Equipment Show, March 17-20; World IT Show, May 11-14; and Food Week, Nov. 9-12.
KINTEX will hold the Kyunghyang Housing Fair from Feb. 23-27; Seoul Motor Show, March 30-April 11; International Food Industry Exhibition Seoul 2011, April 26-29; International Machinery Fair Korea 2011, Sept. 28-Oct. 1; and the Korea Electronics Show (KES), Oct. 11-14.
EXCO will hold the Green Energy Expo from April 6-8; Daegu International Optical Show, April 27-29; Digital Cable TV Show, May 12-15; and Korea Science Exhibition in August.
BEXCO will hold the Busan Content Market from May 13-15; Busan International Machinery Fair, May 24-29; Korea Railways & Logistics Fair 2011, June 15-18; Environment & Energy Tech 2011, Sept. 28-Oct. 1; and Marine Week, Oct. 26-29.
Kim Dae-jung Convention Center will be the venue of SWEET 2011 from March 16-18; ACE Fair, Sept. 22-25; International Climate & Environment Fair, Oct. 11-18; Gwangju International Food Fair, Oct. 27-30; and International Green Car Fair & Korea Robot Show, Nov. 24-27.
Q: What about the coverage of export credit insurance during 2010? Please give us details such as the amount of export credit insurance underwritten, K-sure’s ratios of export, import credit insurance and the top five export credit insured items.
A: Korea Trade Promotion Corp. (K-sure), which is on an emergency management footing for the second straight year, has increased its trade credit insurance underwriting volume to 182.2 trillion won during the period between Jan. 1 and Dec. 10 this year, a 17.4 percent surge from the same period last year. K-sure saw its underwriting volume jump from 82.7 trillion won to 129.8 trillion won in 2008, 165 trillion won in 2009 and an estimated 186 trillion won in 2010. As the nation chalked up $424.3 billion in exports in the first 11 months of this year, up 29.5 percent over the corresponding period last year showing signs of recovering exports to the levels prior to the global financial crisis, K-sure is likely to see a simultaneous increase in its underwriting volume.
Among the top trade credit insurance beneficiaries are Korea’s mainstay exporting items including semiconductors, mobile telecom items, IT products, ships, plant products, automobiles and steel products. K-sure’s underwriting volumes for the semiconductor, mobile telecom and IT sectors stood at 92.5 trillion won as of Dec. 10, accounting for 50.5 percent of the total. Its insurance coverage for plant, ship, natural resources exploration and other capital industries surged to 16.6 trillion won due to an increase in the landing of overseas plant and construction orders following the global economic recovery.
K-sure, who introduced import credit insurance this past July, set an import credit insurance underwriting ceiling for five companies at $45.6 million as of Dec. 10, and supported them with a combined 48.6 billion won. Import credit insurance support is likely to increase as some commercial banks, including Shihan Bank, have decided to recognize import credit insurance policies as collateral.
Q: Will you speak about KTNET’s efforts to invigorate e-Trade and its improvement of efficiency?
A: The economic effects of Korea’s globally top-rated e-commerce service are estimated at 4.7 trillion won per year. As of the end of November, about 51,000 firms utilize KTNET’s e-trade services. The number of e-documents relayed and transmitted in the first 11 months of 2010 totaled 257 million, a 14.4 percent surge over the same period last year. The e-Trade services have the effect of improving firms’ productivity, saving incidental and manpower costs. The e-Nego services made their debut for the first time in the world this past April after the introduction of e-L/C and e-B/L services.
The repeated submission of documents is no longer necessary via the e-Trade document depository of uTradeHub, a national e-trade infrastructure.
KTNET has offered global e-trade services and exported e-trade systems overseas. The company completed a $5.65 million project to modernize Mongolia’s customs administration this February, and it is to finish a $9 million project to build an initial e-trade infrastructure in Libya next November. Korea commercialized the state-to-state e-document exchange service, e-C/O Service, via a government-private sector collaboration project in the B2G sector with Taiwan, while Korea and China are now working on the development of a bilateral e-trade serve through government-private sector collaboration. nw

Han Jin-hyun, director general for trade at the Ministry of Knowledge Economy (MKE)