Export shockExports shrank by a whopping 32.8 percent in January, the steepest drop since monthly import and export statistics have been recorded. Key exports of semiconductors and vehicles halved, and exports to China, Korea’s main buyer, diminished by more than 30 percent.
A weak won usually helps exports but not this time. The monthly trade balance recorded a deficit of $2.9 billion, dragging the value of the won down to 1,390 per dollar. Even when the Lunar New Year holiday is taken into consideration, the figure is bad enough to induce panic. It wouldn’t be an exaggeration to say that Korea’s export-led economy has sustained a direct and heavy hit from the global economic slowdown.
The minister of knowledge economy publicly admitted that exports and the real economy have shrunk by a serious degree. This is the equivalent of admitting we are in for a long and tough slowdown. If our export engine stops, we may be forced to carry out restructuring in the near future. However, Korea is not alone. Every exporting country in the world has been hit by diminishing global trade.
The reason for reduced exports can be found in decreased consumption in many countries rather than our products’ weakness. The entire world is suffering from excess inventory, excess employees and excess debt. Pain is unavoidable until these structural problems are resolved. In the LCD market for cars, a game of chicken is already going on.
The U.S. government recently made sure U.S. steel would be used in that country’s infrastructure projects. Brazil has increased the list of imports for which permission is needed. Russia has increased tariffs. These are sinister signs of trade protectionism. What’s needed right now, however, is confidence, not fear.
Last week, Qimonda, a semiconductor manufacturer based in Germany, filed for bankruptcy. Japanese electronics companies are staggering, and the U.S. Big Three auto manufacturers are barely staying afloat.
Fortunately, our major companies are still on the winning side. Nonetheless, they need to abide by principles and maintain their integrity in order to win the game. Companies’ exports can only stay competitive when labor and management cooperate to increase productivity. The government and banks must let dying companies with too many problems go down. Only then will our economy become resistant against the global slowdown and leap forward when times get better in the future.