Politics and Diplomacy need to play a bigger role for export recovery

Korea’s exports in October recorded 43.5 billion U.S. dollars, down by 15.8 percent from the same time last year, the Ministry of Trade, Industry and Energy said on Sunday. The monthly decline is the largest since August 2009. The 10-month consecutive decline in both exports and imports would certainly end the march of the “one trillion dollars of annual trade,” which lasted from 2011 to 2014. The fall of exports, which helped Korea rank 10th in the global economy for the last 50 years as an engine of the country’s economy, could lead to the crisis of the manufacturing industry and further the Korean economy. Finance Minister Choi Kyung-hwan recently said that if exports rebound, Korea’s economic growth would be in the high end of the three percent range. However, if the trend continues, lackluster exports would rather drag down the economy.

The causes of sluggish exports are not much different from the report from the Bank of Korea released last week titled “A Decline in Revenues in Manufacturing in 53 Years.” The causes are the rise in the value of the Korean won and the global economic downturn. In the first eight months of this year, global trade declined 12.0 percent. Although key exporting nations such as the U.S., China, and Japan are also suffering from a decline in exports, they are not as serious as Korea. Korea’s key exporting items such as electronics, automobiles and chemicals remain the same for a decade and no other export items are on the horizon. Korean companies are no longer full of passion and can-do spirits for exports.

The role of the government and diplomacy is as important as efforts of companies and the recovery of competitiveness in the manufacturing sector. The strong won, which puts pressure on Korea’s exports in particular, is attributable to the Korean economic diplomacy. The U.S. tolerated the “currency manipulation” of Japan and China that fostered their exports with the weak yen and yuan policies, it stayed vigilant about the Korean government’s intervention in the foreign exchange market. Although we cannot blame only Korea for the sour relationship between Korea and Japan, the bad bilateral relationship has pushed Korea’s exports to Japan down by 25.6 percent.

Five months have passed since the free trade agreement between Korea and China, which will help Korea increase exports to China, was signed on June 1. However, the main opposition New Politics Alliance for Democracy tries to reassess existing free trade agreements including the Korea-U.S. free trade agreement, saying, “For a successful free trade agreement with China, we need to review other free trade agreements that are effective.” Chinese Premier Li Keqiang met with National Assembly Speaker Chung Eui-hwa on Sunday and urged for the ratification of the trade agreement, saying, “If the Korea-China free trade agreement becomes effective, it will bring huge benefits to the peoples of both countries.” The situation leaves a bitter taste in Koreans’ mouth.