Korea’s annual exports declined for two consecutive years last year due to the low oil prices, global oversupply, and falling unit prices, and its global trade ranking also fell two steps into eighth position. However, exports started to recover from the second half. Exports of all fi ve major consumer goods such as cosmetics, pharmaceuticals, agriculture, food, household goods, fashion, and apparel have increased by 13.6%, especially cosmetics up by 43.3%. It did fairly well in China, the largest market in the world. And as brand recognition increased, exports to the USA and Europe also increased.
The Ministry of Trade, Industry and Energy of Korea is planning to provide 80 consumer goods companies with annual exports of over US$10 million to create fi ve global brands worth US$900 million . In addition, an action plan will be set up to promote the advancement of nine service industries, including intellectual property rights, medical care, content, and tourism.
In the meantime, the proportion of exports by small and medium-sized enterprises (SMEs) expanding free from the concentration of exports on large enterprises, and the share of SMEs in total exports has increased from 35.9% in 2015 to 37.7% last year. Exports by SMEs are prominent in consumer goods such as cosmetics, knitt ed fabric, and processed goods.
Also, exports by technology-oriented start-up companies are increasing. Exports by venture businesses rose by 2.6 percent over the same period in the previous year which has been an increase for the third consecutive year. Despite a sharp decline in exports of wireless communication devices produced by large conglomerates such as Samsung, especially in the aftermath of the Galaxy Note 7 recall, venture companies producing wireless communication devices grew 19% with success in the emerging markets.
The government plans to turn 30,000 domestic companies in Korea into exporters and expand trade fi nance support for the coming fi ve years, including 5,000 this year.
On the other hand, export prospects are not all optimistic due to global uncertainties caused by the expansion of protectionist trade policies by the Trump administration in the USA and China’s so-called “China Inside” policy, retaliation against Korea over the deployment of the Terminal High Altitude Defense (THAAD), a U.S. anti-ballistic missile system, and the global low-growth trend.
The adoption of the border adjusted tax (BAT), called for by U.S. President Donald Trump, is expected to lead to a major blow to Korean exports to the United States of major goods such as automobiles, food and beverage, and appliances.
In its report, “The Adoption of Border Adjusted Tax (BAT) by The U.S. and Its Impact on Korean Economy and Industries,” the Korea Trade-Investment Promotion Agency (KOTRA) said on December 15, 2016, “When the BAT is introduced, the prices of almost all consumer goods including imported apparel, food and beverages, household appliances, and automobiles are expected to surge by more than 20%.”
KOTRA Chairman Kim Jae Hong said that new ways of thinking will be required for making our way through the new protectionism and isolationism for a positive transition of exports and globalization of SMEs.
This year, KOTRA decided to focus on expanding trading opportunities in line with the restructuring of the global economic structure, securing an export recovery momentum by lowering the threshold for foreign export and strengthening the export-oriented marketing, preparing the ground for SMEs to grow through globalization, and att racting investment for industrial upgrading and export recovery. Meanwhile, Korea’s exports this year have increased by 3.4 percent year-on-year to US$51.5 billion. An analysis indicates that it is going to lead the recovery of exports as the economic stimulation efforts in advanced markets become full-scale. Emerging markets are expected to increase in exports due to the expansion of infrastructure investment and expansion of the consumer goods market. However, there are downside risks such as the spread of protectionism. Exports to China are expected to increase by only 2.5% with the help of the efforts to strengthen domestic manufacturing competitiveness despite concerns about economic hard-landing concerns.
Despite the lessening concerns about an economic hard landing and efforts to strengthen domestic manufacturing competitiveness, exports to China are expected to increase only by 2.5%.
Now let’s take a look at the trend of K-consumer goods that has led to the growth in foreign exports despite overall sluggish exports last year.
K-consumer goods refer to a group of items that are showing strong exports thanks to the popularity of Hallyu, or the Korean Wave. These include processed foods (K-food), beauty products (K-beauty), sports (K-sports), and bath products (K-life).
K-products such as toiletries, wigs, bags and belts, and fashion goods such as K-beauty products including cosmetics and K-life products such as soap and shampoo increased by 38.5% and 42.1% year-onyear respectively. Clothing, exercise, and entertainment items accounted for a larger share of exports to developed countries than emerging markets.
In addition, K-life’s bath products and K-bio drugs are mainly being exported to emerging markets – Southeast Asia and Eastern European countries. In many Southeast Asian countries, in particular, the purchase of bath goods is reported to be high.
K-consumer goods will continue to be popular among overseas consumers and become a promising export item due to the rising recognition of Korean brands through Hallyu and their diff erentiated designs.
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