Problems in eurozone could hurt Korea’s exports

The terrorist attacks in Paris will have a limited direct impact on Korean exports, but may be a negative factor in the long run, the Korea International Trade Association (KITA) said on Tuesday.

Korea’s exports to France have been declining this year, mainly due to declining sales of Korean cars and mobile phones in France. According to KITA, Korean shipments to France declined by 4.4 percent and were worth only about $2.05 billion from January to September. Automobiles and mobile phones accounted for more than a third of the exports.

But exports have recently started to revive, growing 72.6 percent year on year in August and 21.1 percent year on year in September, as French companies purchased Korean vessels over the two-month period.

If sociopolitical tension about the possibility of future attacks remains unsolved, KITA worried that the weak sign of recovery may disappear completely, hitting Korean exports in the short run. In the long term, the overall eurozone economy could slump even further and lead to a weaker euro if the crisis continues.

“In the short run, France is likely to strengthen its customs procedures, resulting in Korean exports shrinking and losing cost competitiveness in the sense that the trade insurance fee on shipments to France will get pricier. If additional terrorist attacks happen, exports to the whole of Europe are likely to drop,” said the KITA report published on Tuesday by the Institute for International Trade.

“If the Paris incident continues into a shrinkage of the eurozone economy in the long term, EU members can’t avoid reducing the buying of Chinese products, which eventually results in the reduction of Korea’s intermediate parts exports to China.”

Direct exports to the European Union account for 9 percent of total Korean overseas shipments, KITA said. However, when indirect shipments to the European Union via intermediate parts exports to China are included, that number climbs to 11.1 percent of the total.

BY KIM JI-YOON [kim.jiyoon@joongang.co.kr]