[EDITORIALS]Service sectors are to blameThe nation seems headed for a string of trade deficits. Korea ran a $300 million deficit in trade in February, the first consecutive two-month deficit since the 1997-1998 financial crisis. With international oil prices rising, the deficit was foreseen. But the rate of growth and the amount of the deficit, combined with declining domestic consumption, lead to fears about a frozen economy.
Korea must act quickly to reduce energy consumption and increase exports in order to turn the deficit around. There is no guarantee that any war between the United States and Iraq will be short-lived, so lowering the demand for energy is important.
But the real reason for Korea’s deteriorating balance of trade may lie in the asymmetrical balance that supports the current account. We have relatively poor export performance in goods, but we also have a rapidly surging deficit in our balance of trade in services.
Last year, the services trade balance recorded its largest deficit ever, $7.4 billion, because of the increase in travel, education abroad and royalty payments. The deficit cut the $14.1 billion won surplus in merchandise trade in half. If the imbalance in services trade is not corrected, it is difficult to expect a surplus in the overall trade account.
Even if we regard overseas education as an investment for the future, the luxurious foreign travel packages Koreans enjoy are a problem. But going after leisure travelers would be missing the point. The task at hand is to increase exports by the Korean services sector through better competitiveness. The nation’s outdated laws and systems automatically translate into a negative balance in services. We cannot simply dismiss the reality that our education and medical services are not competitive and people cannot play a round of golf at a reasonable price.
The level of the Korean service industries are near the bottom of rankings of developed countries. Beginning this year, all services will be targets for market opening in world trade talks, not just agriculture. Yes, there will be some market shocks, but opening also will breed competitiveness.