The nation is set to make two achievements in external trade this year ― its volume exceeding $1 trillion for the first time and a deep cut in the deficit in trade with Japan. It deserves to congratulate itself on this.
The volume of trade, which was at $898.8 billion at the end of last month, will hit the $1 trillion mark early next month if the trend continues. Korea will be the ninth country in the world to reach that level. Dec. 12 has been set as the date for a congratulatory ceremony for the event, which will also double as the Trade Day ceremony.
Korea has come a long way since its one-year exports topped $100 million in 1964. To commemorate the event, the government designated Nov. 30 as Export Day and changed it to Trade Day later. Exports have since remained the driving force behind the nation’s economy. Now Korea is a global leader in consumer electronics, information technology, auto making, shipbuilding and steel production.
Due credit must be given to the late President Park Chung-hee, who mobilized all resources available to promote exports. In 1966, he started to summon managers of exporting companies to a monthly export-promotion conference in the presidential office.
He later honored outstanding performers with citations and committed himself to providing support for them. Under his leadership, the nation attained the goal of increasing exports to $10 billion in 1977, three years ahead of the target year.
Of course, his export drive had its downside. Businesses geared for domestic consumption atrophied, as Park channeled credit to exporting industries on concessionary terms. Human rights were frequently breached, as he pushed down wages for exporters and suppressed opposition to his authoritarian rule. His authoritarian rule, which invited protests from students and other dissidents, came to an end when he was shot to death by his top intelligence officer in 1979.
Samsung, Hyundai, LG and other exporters have since had to stand on their own, with the government’s role, under new rules in international trade, reduced to nothing more than improving the exporting environment. Now the key question is whether or not they will be able to parlay their past success into continued growth. That depends on their capacity for innovation. If they are to meet growing challenges from their rivals, they will have to spend more on research and develop new products as market trailblazers. It is time for them to rise above their tried and tested catch-up strategies.
Another achievement Korea will have made in trade this year will be a big reduction in its deficit with Japan. Officials say the deficit will be around $25 billion this year, compared with $36.1 billion last year.
Large deficits with Japan are a chronic problem for Korea, which is sourcing key parts, components and materials from Japan for the manufacture of export items. According to a recent report from the Samsung Economic Research Institute, a 1 percent increase in Korean exports has meant a 0.96 percent rise in imports from Japan. But this long held pattern will be broken this year if the trend keeps up.
Few Korean officials venture to determine whether the deep cut in the deficit will prove to be a passing phenomenon or the harbinger of a durable change in the terms of trade with Japan. But they agree that Japan’s earthquake and tsunami and its strengthened yen have contributed to reducing its shipments to Korea.
Another development that is heartening to Korea is that smartphones, tablet computers and other Korean-made products have started to penetrate Japan, a market which has long been considered impregnable. Moreover, a growing number of Japanese companies, under pressure from a strong yen, are deserting domestic manufacturers to import parts and components from Korea.
The manufacture of parts, components and materials will emerge as a major export industry if their exports amount to $650 billion in 2020, compared with $229.3 billion last year, as projected by the Korean government. If the ambitious goal is to be achieved, the government will have to assist manufacturers in their research and development.
