[Editorial] Time to change Korea’s industrial structure

Korea’s exports have declined for six consecutive months. The trade deficit has continued for 13 months. According to the latest data from the Ministry of Industry and Trade, Korea’s exports in March stood at $55.13 billion, a 13.6 percent reduction on year and a plunge for six consecutive months. Such a drastic decrease was the first since 2020 amid the Covid-19 pandemic. The trade balance showed $4.62 billion in losses last month, the 13th straight month.

A primary reason for the dramatic cut in exports is our industrial structure heavily relying on semiconductors and China. Korea’s chip exports showed a rapid reduction in March — a 34.5 percent decrease on year — due to dwindled demand for IT products coupled with the price plunge for chips, Korea’s main export item. Korea’s chip exports have been on a downward spiral for eight consecutive months.

China, the largest importer of Korean products and the country with which Korea had the largest trade surplus, is also changing fast. Last month, Korea recorded $2.77 billion in trade deficit with China for six consecutive months. Worse, China has started to reopen its market after the pandemic, but it does not affect Korea’s export. That’s because Chinese companies started competing with their Korean counterparts full-on after putting an end to the era when China exported products after importing intermediary goods from Korea.

Korea cannot survive without exports. For a country whose trade accounts for 70 percent of its GDP, the six-consecutive-month negative export and 13-consecutive-month trade deficit expose fundamental problems with its industrial structure. An analysis by the Korea Economic Research Institute of Top 10 exporters shows the source of the problem: a heavy reliance on certain products, like chips, and certain countries.

Korea’s concentration on certain products was the highest among the top 10 exporters. It scored 779.3 points, even higher than their average of 548.1 points, over the past three years. The reliance was particularly high for electric equipment, devices and cars. Korea’s dependence on certain countries also was the highest (1,019.0 points) only after Canada.

A country with abnormally high reliance on specific items and countries is most vulnerable to outside shocks, as we have clearly seen in the Sino-American war over technology hegemony and the pandemic. Without revolutionary efforts to change the weak industrial structure, diversification of exports items, and expanding export markets, the Korean economy has no future.