Korea Necessitates FTA Promotion for American and EU Markets

It appeared that Korea's competition with American and EU member nations is very fierce. Therefore, Korea needs to accelerate the promotion of FTAs with those nations in the wake of the recently concluded FTA with Chile. In the world market, it also appeared that Japan is still Korea's largest competitor, and Korea's competition with China is deepening.

Such results were revealed in an "Analysis of Competitiveness by Nation" analyzed by the Trade Research Institute (TRI) of Korea International Trade Association (KITA) in terms of Korea's market shares by commodity as compared with its major competing countries for Korea's four key export markets. The four markets, comprising 58% of Korea's total exports, are the United States, Japan, EU and China. The TRI had selected 15 nations for each market that have high market shares and export commodity structures similar to Korea.

When the total of 15 nations' competition indices is regarded as 1 (one), if the competition degree of a nation exceeds 0.067, the average value of 15 nations, it means that Korea's competition with the nation is fierce. First, in the U.S. market, Korea's competition appeared to be the fiercest with Japan (competition degree 0.191), followed by Canada (0.178), Mexico (0.170) and China (0.115). Korea's competition with Canada and Mexico has all the more intensified since 1996, with the conclusion of NAFTA (North America Free Trade Agreement) between them and the United States as a momentum, centering around machinery, electric/electronics goods and automobiles.

In Japanese market, Korea's competition with the U.S. (0.240) and China (0.223) appeared to be severe. However, the intensity of competition with these two countries has slowed down on the whole for the past five years since 1996, while Korea's competition with the third to fifth competitor nations Indonesia (0.115), Taiwan (0.101) and Malaysia (0.086) has deepened.

In the EU market, Korea's competition appeared to be fierce with Germany (0.221), the U.S. (0.146), France (0.110) and Britain (0.099), indicating that Korea's competition with EU member countries has been analyzed to be severe as in the case of the U.S. market. Nevertheless, for the past five years since 1996, Korea's competition with the EU member nations, including Germany, has remained unchanged, but become fiercer with the U.S., Japan and China, in general.

Korea's competition with other countries in Chinese market appeared to be fiercer in the order of Japan (0.281) and Taiwan (0.221), followed by the U.S. (0.110), Hong Kong (0.064) and Germany (0.046). For the past five years, however, Korea's competition with these five nations has lowered due to their reduced exports to China, but it has become more or less fiercer with middle-rated Russia, Singapore, Indonesia and Thailand.

The TRI's analysis of competitiveness by nation indicated three major points. First, for Korea's continued export growth in the U.S. and EU markets, the nation is required to positively promote the conclusion of FTA with member countries or key nations in the regions. Second, Korea needs to create an advantageous environment in price competition factors such as exchange rate, wage and monetary interest with Korea's strongest competitors Japan and China in order to maintain its product competitiveness. Third, Korea also has to expand facility investment for high-value addition and technology development on a continued basis so as to sustain its competition gap with Southeast Asian nations such as Indonesia, Malaysia and Thailand, whose competition with Korea is more intensifying in Japanese and Chinese markets.