FTA with US boosts Korea`s exports despite global slump

Korea’s exports to the U.S. have grown significantly due to the Korea-U.S. free trade agreement despite a drop in overall Korean exports, which is caused by the European financial crisis and China’s economic slump. The Korea Customs Service said that if it had not been for the trade accord, Korea’s export and trade balance would have been hit hard due to global economic conditions.

According to the customs agency Sunday, over the past two months from March 15, when the accord took effect, to May 14, exports to the U.S. grew by 11.3 percent (1.14 billion U.S. dollars) to 11.18 billion dollars from the same period last year. Imports from the U.S., however, grew a meager 2 percent to 7.73 billion dollars over the same period. Accordingly, the trade surplus with the U.S. soared 40.2 percent from 2.46 billion dollars to 3.45 billion dollars over the same period.

By contrast, Korea`s overall exports over the same period declined 4 percent from last year to 93.4 billion dollars. With imports declining 2.3 percent to 88.9 billion dollars, the overall trade surplus reached 4.44 billion dollars. The trade surplus with the U.S. accounted for 77.7 percent over the past two months.

The increase in exports to the U.S. was led by items that benefited from tariff cuts due to the effectuation of the free trade agreement. The exports of items whose tariffs were cut due to the accord grew 19.4 percent on average, with those of petroleum products, which saw a 52.5 percent-tariff eliminated, jumping 42 percent, followed by cars rising 31 percent and car parts growing 15 percent. The corresponding figure for products whose tariffs remained the same was 6.9 percent.

Korea’s exports to China, European Union and Japan, however, which account for 45 percent of Korea`s export volume, sharply fell. In April, exports to European countries dropped 20.7 percent and those to China fell 2.9 percent. Exports to the EU and China have decreased for two consecutive months. Shipments to Japan dropped 22.8 percent last month, the first decline since October 2009.

weappon@donga.com