BUSINESS

Korea-U.S. FTA expected to boost exports of Korean IT, automobile products

By Korea Herald
  • Published : Mar 16, 2012 - 14:23
  • Updated : Mar 16, 2012 - 20:38

The Korea-U.S. Free Trade Agreement, which came into effect Thursday, is expected to benefit the country’s information and technology industry as well as the automobile parts market, analysts said.

Analysts here said Korea-made IT products such as televisions, smartphones and premium digital appliance items would grab a bigger share in the U.S. market with the eased trade conditions.

“Looking at the trade pact in a positive light, electronic goods made in Korea could have long-term competitiveness and a higher market share in the U.S. or South America market,” said Park Kang-ho, an analyst at Daishin Securities.

Items such as mobile phones, computers and chips are already labeled non-tariff exports by the World Trade Organization, but local companies are looking forward to greater market shares in overseas markets.
Kia Motors Corp. vehicles bound for export await shipment at the port in Mokpo. (Bloomberg)

Park said that Korean electronics firms can differentiate their products in overseas markets and change their pattern of exports by focusing on high-end markets, whereas they concentrated on low-tier products in the past.

“It’s difficult to give the exact figures, but we expect Korean electronics giants to show increasing market share in the global TV market as well as the international markets for large refrigerators and washing machines,” he said.

“With the implementation of the FTA, the overall sales figure for the nation’s IT industry is projected to grow within the 10 percent range in the long term compared to the latest figures.”

Other analysts say the demand for digital TVs will also surge in the U.S. as the country is moving toward digital broadcasts, which could benefit Korean firms like Samsung and LG Electronics and their suppliers.

The trade pact will also enable Korean electronics to go through customs at a faster pace, speeding up trade and possibly increasing Korean firms’ total trade volume.

For the automobile sector, some players in Korea’s parts industry have been immediately exempted from paying tariffs, which range up to 10.2 percent, brightening the prospects for smaller parts makers.

Tariffs for automobile parts were exempted from Thursday, but the tariffs on complete vehicles will be removed in four years.

With the sharp cut in tariffs, parts suppliers have the chance to transform into global names in the industry, but they also face stiff competition from those outside the country, analysts say

They say the Korean firms must gain competitiveness and economies of scale to survive in the global game.

Korea is the fifth-biggest carmaker in the world, but only four Korean automobile parts suppliers are in the global top 100. A total of 29 top-100 part suppliers are from Japan, followed by 27 from the U.S. and 18 from Germany.

By Cho Ji-hyun (sharon@heraldcorp.com)


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