Korea’s first trade surplus with Japan in auto parts

Korea had seen a chronic trade deficit with Japan since the two countries normalized their diplomatic relations 50 years ago. It was particularly serious in parts and materials. Korea also gained a lot from importing parts and materials from Japan, which is geographically close and technologically advanced, and exporting to the U.S. and China after assembling them. However, the trade deficit with Japan was something to be resolved eventually. Overcoming Japan in the parts and materials industry was one of the topics that this reporter covered a lot personally as a financial news reporter and a middle manager.

Last year, Korea recorded a trade surplus with Japan for the first time in auto parts. Although it is not a large amount, it is a sea change from the one billion dollar annual deficit in 2010. “It is all the more meaningful in that auto parts was one of the weaknesses of Korea in trade with Japan for a long time and it was when the yen was weak as a result of ‘Abenomics,” said Kim Yong-geun, president of the Korea Automobile Manufacturers Association.

The advancement of Korea’s auto parts industry is largely attributable to Japanese auto parts makers, which were hit hard after the earthquake four years ago and the increased technological competitiveness of Korean auto parts makers. It is also positively affected by the enhanced recognition of Hyundai Motor and Kia Motors on the global stage, which also increased the recognition of Korean auto parts makers supplying parts to the automakers. This shows that the relationship between a large company and a supplier is not a “zero-sum game” but more of “coexistence.”

Korea’s parts and materials industry have grown by leaps and bounds for about the recent decade to surpass the trade surplus of 100 billion U.S. dollars. It is noteworthy that the fundamentals of the Korean economy, despite many challenges, have changed from the assembling industry to parts and materials industry on a gradual basis. Many of the suppliers are small but strong and located in provinces, which contributes to the economy of the regions. Though the trade deficit with Japan in the entire parts and materials sector shrank, it is still far from a trade surplus. Hopefully, the trade surplus with Japan in auto parts could spread to other sectors as well.