Korea Rewrites ‘History of Trade’
By Ryu Jin
In 2006, South Korea made a milestone in its history of trade. In the early 1960s, it was just a poor country that at best exported wigs. In just four decades, it has become the 11th country in the world to break the record of $300 billion in exports.
More concretely, the feat came 42 years after the nation's annual exports first posted $100 million in 1964; 29 years after it reached $10 billion in 1977; 11 years since it exceeded $100 billion in 1995; and in just two years since it topped $200 billion in 2004.
South Korea, which has grown to become a powerhouse in the fields of shipbuilding and semiconductors among others, now tries to redouble the figure to $1 trillion in total trade, including exports of $600 billion, over the next five years.
Over the past 45 years, South Korea has experienced a rapid and condensed growth with average annual growth rates of 7.5 percent, especially until the 1980s based on low wages, excess demand and increases in exports.
Since the 1990s, however, economic growth has entered a new phase. In particular, the growth rate dropped significantly largely due to slow domestic consumption and falling investments since the 2000s.
``At a time when the country's economic growth has been slowing down, the $300 billion in exports last year was a brilliant achievement,'' said Lim Sung-ho, a researcher at the Institute for Northeast Asian Economy & Trade.
Japan's yearly exports grew from $100 billion in 1979 to $200 billion in 1986 and $300 billion in 1991. In 2004, the country's total trade exceeded $1 trillion including more than $500 billion in exports.
``South Korea saw the increase from $200 billion to $300 billion in two years, three years faster than Japan,'' Lim said. ``This is a good sign that the country's export growth rate is picking up speed.''
Now the country's total trade is expected to top $700 billion by the end of this year in accordance with sharp growth rates in recent years, according to the Ministry of Commerce, Industry and Energy and the Korea International Trade Association (KITA).
Government ministries have been seeking concrete measures for a mid-term roadmap to the next goal of $1 trillion in trade including exports of over $500 billion in the next five years.
As of late 2005, there were only four countries whose total trade volume exceeded $1 trillion: the United States, Germany, China and Japan. They are also countries that posted annual exports of more than $500 billion.
``It means that a country must achieve the goal of $500 billion in exports in order to join the group of countries with more than a $1 trillion trade volume,'' said Kim Su-in, a researcher at the Institute for International Trade.
Experts stress that the country needs to manage a stable domestic economy, advance main export industries and adapt itself to the changing business environment in global markets in order to further expand its exports.
It took 13 years for Japan to pull up its exports from $300 billion to $500 billion. During the period, the country was in a longtime slump amid soaring real estates prices. A stable domestic economy is very important to secure competitiveness for exports.
Further advancement in export industries is another key for the goal of $500 billion in exports. ``Sandwiched'' between advanced countries and developing countries, South Korea has no other choice but to find new growth engines and explore new markets.
Leading conglomerates such as the Samsung and Hyundai-Kia Automotive groups have also been putting spurs on their global management with new strategies to find ways for sustainable growth.
In particular, private enterprises also should brace themselves for the era of free trade agreements (FTAs), into which the country has already entered. Experts warn that the FTAs could come as an opportunity or crisis depending on their preparedness.
Since the first deal with Chile in 2004, South Korea has actively pursued bilateral FTAs with other nations and economic blocs in the belief that they would provide new momentum for growth.
Beside the deals with others including Singapore and the Association of Southeast Asian Nations (ASEAN), the country also signed an FTA with the United States in June and is now negotiating with the European Union (EU) for another major deal.
Business leaders are now calling for an FTA with China, the largest trading partner for South Korea, in addition to the calls for deals with other countries in the Asia-Pacific region including Japan and Australia.
``Recent surveys show that a majority of people think that we need some more time before seeking an FTA with China,'' a KITA official said. ``But most of them recognize that a South Korea-China FTA is inevitable for our economy.''
According to a poll last month by the Korea Chamber of Commerce and Industry, 70 percent of domestic companies expect that an FTA with China would have a positive influence on South Korea's exports to the neighboring country.