It is certainly necessary for the country to step up efforts to diversify its export markets in the face of a prolonged slump in outbound shipments.
But the government’s plan for restructuring export markets, which was unveiled last week, is unreasonable and could erode the global competitiveness of South Korea’s export-oriented companies.
Under the plan, the proportion of four major markets -- the US, China, Japan and the EU -- in the country’s total exports is set to decrease from 53.4 percent in 2018 to 40 percent in 2022.
Over the cited period, the corresponding figures for what the government classifies as strategic and emerging markets are supposed to increase from 21 percent and 9 percent to 30 percent and 15 percent, respectively. Strategic markets refer to central and southeast Asian countries plus Russia and India, while emerging markets include nations in Latin America, the Middle East and Africa.
Trade Ministry officials say the plan is intended to reduce Korea’s “excessive reliance” on major export destinations by making further inroads into other developing and emerging markets.
It is a misconception that Korea excessively relies on the four largest economies for its exports. There is more room for increasing shipments to the US, China, Japan and the EU, given their combined share of global gross domestic product amounted to 67 percent last year.
It should also be noted that it is relatively easy for companies with an established reputation in advanced countries to make inroads into developing markets, while it is not so easy for those successful in developing nations to attract customers in developed markets.
If a company decides to focus on selling products in developing markets while reducing the proportion of sales in advanced economies, it will be deemed by corporate analysts and customers alike to be in a downturn.
Moreover, it is not easy to advance into developing and emerging markets on their own.
Most of them have imposed higher tariffs and erected more nontariff barriers to imports than advanced countries. Emerging markets are also more vulnerable to global economic changes. They tend to suffer severe economic difficulties when advanced economies slow down.
Hyundai Motor, the country’s largest carmaker, has strenuously pushed for expanding sales in emerging markets. But emerging markets‘ proportion of its global sales rose just 1.3 percentage points over the past seven years to 48 percent in 2018.
The company has recently seen a decrease in the number of vehicles sold in Russia and Brazil, with the growth of its sales in India decelerating sharply this year.
In its current form, the government’s plan for restructuring export markets would be not just unachievable but also detrimental to the country’s trade competitiveness.
It does not make sense to overhaul the export structure focused on advanced markets, which has been established through five decades of efforts by local companies to overtake world-class foreign rivals. Even more absurd is the government’s wish to finish the restructuring of export markets within three years by the time President Moon Jae-in serves out his five-year term.
Above all, it is an anachronistic practice seen during the authoritarian rule decades ago to set numerical targets for specific market shares of the country’s outbound shipments, not considering changes in global economic conditions and industrial trends.
Indeed, a protracted fall in the country’s exports calls for stepped-up efforts to boost them. Outbound shipments from Asia’s fourth-largest economy plunged 13.6 percent on-year to $44.2 billion in August, extending their downward streak to nine consecutive months, due mainly to the prolonged US-China trade spat and a drop in semiconductor prices.
Boosting exports is all the more necessary when domestic demand is weakening, further weighing on the economy. Retail sales in the country edged down 0.3 percent in July from a year earlier, marking the second consecutive month of decline.
The government plans to set aside more than 6 trillion won ($5.07 billion) next year to strengthen support for exporters. Trade insurance funds will be expanded and more money will be spent on promoting research and development and helping local firms acquire high-tech companies abroad.
These measures need to be taken along with effective efforts to diversify export items and destinations. What is least needed is a regressive restructuring of export markets to perform better in the second-tier league.