Korea-Japan trade suffers

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Korea-Japan trade suffers

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With Monday being the 50th anniversary of Korea and Japan establishing diplomatic relations, trade analysts said the two countries should work on solving political and diplomatic issues in order to revitalize trade, which has sagged after reaching its peak in 2011.

According to a recent report by the Institute for International Trade (IIT), a research institute under the Korea International Trade Association (KITA), Korea-Japan trade started out at $220 million in 1965 and reached $108 billion in 2011, mostly thanks to Korea’s exports of mobile devices, auto parts and cultural content.

But after various diplomatic and political disputes over historical issues, the trade volume steadily shrunk to $86 billion last year.

Korea’s exports to Japan last year were about $32.2 billion, while imports were $53.8 billion.

Japan was Korea’s third largest buyer last year, following China and the United States. Korea’s largest export products last year were intermediary products, like crude oil products, steel panels, mobile devices, semiconductors and auto parts.

Export shrinkage has quickened thanks to Japanese Prime Minister Shinzo Abe’s intentional weakening of the yen to boost Japan’s industries and exports.

IIT pointed out that the worsened diplomatic relationship has had the greatest influence on regular consumers rather than business-to-business products. Their fondness for Korean things has been diminished.

Makgeolli (Korean rice wine) once was one of the most popular Korean-made products sold in Japan. Makgeolli exports to Japan were $48.4 million in 2011, but have shown a steady decline to $32 million in 2012 and $9.1 million last year, according to the Korea Customs Service.

Another report from KITA’s Tokyo office showed a similar trend for Korean bread and fresh and processed agricultural produce. Those exports to Japan declined nearly 70 percent over the past three years.

Exports of cultural content like K-pop music, movies and TV shows also have slowed in the past few years.

According to the Korea Content Promotion Agency, cultural content exports to Japan used to maintain an average 20 percent growth rate every year from the early 2000s through 2011. However, the growth rate slowed to 8 percent in 2012 and 2013.

In a survey done in April by the KITA office of 266 Japanese buyers, 47 percent said their trade with Korean partners shrunk after relations deteriorated after 2011 and Japanese regular consumers showed weaker interest in Korean products.

Sixty-four percent of the survey participants said they hope to expand purchases from Korean companies if diplomatic relations get better.

“Korean companies in Japan have suffered for the past few years,” wrote a researcher in the KITA Tokyo office. “Most companies said the weak yen was the biggest culprit for their business obstacles in 2013, but now they say hardships have been caused by sour diplomatic relations since last year.”

“Korea and Japan should jointly explore third markets like Southeast Asian countries and China in areas like mobile devices, healthcare, robotics and aviation,” a researcher at the IIT’s trade trend analysis division wrote in the report. “These are areas where the two have competed against each other and both countries hold competitive edges compared to the rest of the world. So, instead of simply trying to triumph over each other, the two countries have to consider dividing up each other’s roles and jointly developing products and technologies.”

“This year is the best opportunity to enhance the Korea-Japan relationship,” said Kim Eun-young, managing director of the KITA Tokyo Center. “There are demands from businesses in both Korea and Japan for a better diplomatic relationship to revitalize economic cooperation.”


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

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