Research report urges tripartite cooperation

Korea, China and Japan’s presence in the global market is increasing, but more balanced industrial cooperation is needed and that might lead to a solution for political and diplomatic conflicts, according to a Hyundai Research Institute report released yesterday.

The economic power of the three East Asia countries has grown significantly in the past decade. In 2012, the combined value of exports from Korea, China and Japan accounted for 27 percent of global trade, compared 17.6 percent in 2000. Their total trade surplus last year was $1.36 trillion, nearly quadruple from $344 billion in 2000.

But behind this growth, HRI said, the competition got fierce, especially in core industries such as steel, automobiles and shipbuilding. Furthermore, competition has been intensified by political and diplomatic conflicts.

HRI said industrial cooperation would be the easiest way to develop relationships among the three countries, although data suggests an increasing imbalance due to the rise of China.

According to HRI data, 7.7 percent of intermediary goods used in Korea in 2011 were from China or Japan, up 1.6 percentage points from 2000. For Japan, the figure expanded from 1.1 percent to 3 percent.

In contrast, China’s intermediary goods imported from Korea or Japan decreased from 3.1 percent to 2 percent, indicating the country doesn’t buy as many products from Korea and Japan.

At the same time, China became more competitive within the circle. The data from HRI showed that China’s contribution to value-added creation went up from 5.6 percent in 2000 to 18.4 percent in 2011.

Korea’s contribution to the circle’s value-added creation increased slightly from 3.7 percent to 4.4 percent, while Japan’s plunged from 13.8 percent and 9.9 percent, evidence of its eroding competitiveness and power in the region.

Korea’s cooperation with Japan got weaker, but stronger with China.

According to HRI data, trade between Korea and Japan accounted for 15.9 percent of total trade among the three countries in 2012, down 15.5 percentage points from 2000. However, trade between Korea and China went up 14.4 percentage points. Meanwhile, the share of China-Japan trade has stayed at 50 percent for 12 years.

“The dependence on China is too focused in terms of intermediary goods and value-added creation. To prevent expansion of this unbalanced structure, Korea and Japan also need to strengthen their cooperation in order to create new value-added products that can meet China’s demand,” the HRI report said.

The institute even suggested a Korea-China-Japan Free Trade Agreement in a bid to boost competitiveness in the global marketplace.

“The three countries should have a cooperation plan in areas like maritime shipping, ICT and green energy development,” it said. “These nations should be also plan to set up industrial standards to resolve technological barriers and enhance infrastructure to boost trade.”

BY JOO KYUNG-DON [kjoo@joongang.co.kr]