Exports reached second-highest record in April

Korean exports last month saw their sharpest growth in nearly five and a half years and reached their second-highest historic level, largely thanks to strong recovery in the global market.

Ships and computer chips in particular saw significant improvement. Exports of Korean-built vessels reached an all-time record, and shipments of semiconductors, vital components in computers and mobile devices, were at their second highest, thanks to rapid development of advanced technologies that require faster and denser computer chips.

Exports in general grew 24.2 percent in April compared to a year ago, the Ministry of Trade, Industry and Energy said Monday, and totaled $51 billion. Not only is it the highest number of shipments since the all-time record of $51.6 billion in October 2014, the growth itself is the sharpest since August 2011 when it grew at 25.5 percent year on year.

Korean exports have been on an upswing for the past six months. The last time Korean exports grew for more than six consecutive months was between November 2009 and December 2011.

On top of that, the past four months have seen straight double-digit growth.

Breakdown of goods

Among Korea’s 13 leading export items, nine goods saw year-on-year growth accelerate.

Ships surged 102.9 percent compared to a year ago to reach an all-time high of $7.13 billion. In April, Korean shipbuilders were able to export 24 high value-added vessels, including two offshore oil plants. This is a sharp increase compared to last year, when exports grew just 24.1 percent.

Semiconductor shipments rose nearly 57 percent year on year to $7.14 billion. Computer exports rose 11.6 percent and flat panel display exports also saw double-digit growth of 10.2 percent.

Telecommunications equipment and automotive parts, however, as well as textile and consumer goods all dropped from a year ago.

By market, all regions grew except for the Middle East, which saw a 3.6 percent decline.

Exports to Europe saw the biggest increase among foreign markets to reach an all-time record. Exports of Korean goods to the European Union grew 64.9 percent to $6.43 billion. Vietnam came in second with 63.1 percent.

And China, despite a widespread consumer boycott of Korean goods over a missile fracas, reported a double-digit increase of 10.2 percent in Korean imports. The Korean government cited growing demand for semiconductors, machinery and petrochemicals - all intermediary supplies - as a viable offset to losses in consumer goods. China still remained Korea’s largest market at $10.6 billion.

Korean exports to the United States saw the sharpest increase for the first time in two months, 3.9 percent, largely thanks to increased shipments of machinery, petroleum goods and consumer electronics.

“Innovation in Korea’s export structure as well as favorable external conditions, including the global economy and industries’ self enhancement in competitiveness, helped expand exports,” said Chae Hee-bong, deputy trade minister. “For example, small and midsize companies tried to become exporting businesses, and there has been an increase in the number of consumer goods among the exported items.”

He added that an increase online commerce also contributed to the export performance.

“The IMF raised its global outlook for growth from 3.4 percent to 3.5 percent, while the WTO projected an increase in global trade,” Chae said, “which includes stronger growth in emerging markets and increase in imports.”

Good vibes

The export recovery has spurred think tanks to readjust their projections for Korean GDP growth this year. The latest to jump on the bandwagon was the Korea Institute of Finance. On Monday, it raised its outlook to 2.8 percent from a previous projection of 2.5 percent set in October, citing strong export recovery.

Previously, the Bank of Korea, the state-run Korea Development Institute and private think tank LG Economic Research Institute each raised its outlook to 2.6 percent.

However, the question remains whether Korea’s export recovery will continue, especially with growing tension with China and U.S. President Donald Trump threatening to renegotiate or even scrap the two countries’ free trade agreement.

The Korean government said as of now there was hardly any impact from China’s trade retaliation against Korean companies as well as the U.S. government’s argument that the free trade deal be renegotiated.

The Korean Trade Ministry believes the current momentum will continue into May. Last week, Trade Minister Joo Hyung-hwan projected Korea’s exports to grow as much as 6 or 7 percent, this year.

The Korean government, however, has raised concerns particularly over the U.S. government’s threat to renegotiate trade deal, which was once again raised in a recent interview with Trump.

On Friday, during an interview with Reuters to mark his 100th day in office, the president called the free trade deal with Korea “horrible” and vowed to either renegotiate or terminate it but didn’t provide details.

Growing pains

The Korean government has said scrapping the trade agreement will not only hurt Korea’s market but also the U.S. market.

“The FTA between Korea and the U.S. is a platform that brings about a win-win result where it expands not only trade but also investment between the two countries,” said Deputy Trade Minister Chae. “If the FTA is terminated and tariffs return to their former level, Korea’s exports to the U.S. will shrink. U.S. exports to Korea will shrink as well.”

The Korean Trade Ministry continued to stress that it was making efforts to improve what the U.S. government considers unfair trade.

“The trade surplus with the United States has been reduced by $2.5 billion from $25.8 billion in 2015 to $23.3 billion in 2016,” Chae said.

A renegotiation of the bilateral trade agreement between the two countries is estimated to create an economic loss of $17 billion or roughly 18.4 trillion won ($16 billion) in the next five years, according to a study by the Korea Economic Research Institute.

The Korean automotive industry is expected to be the biggest victim, as the losses incurred from a renegotiation is estimated at $10.1 billion.

Meanwhile, imports also grew in April, by 16.6 percent to $37.8 billion. It was the first time in more than two and a half years that imports have grown more than six months. The last time was in September 2014.

It was also the first time in five years since imports enjoyed double-digit growth for four straight months.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]