South Korean trade officials are scrambling to overcome a deteriorating trade balance following a decline in exports to major destinations including China and Russia following various incidents.
On May 2, Minister of Commerce Yeo Han-koo chaired a meeting to draw up countermeasures against external negative factors that involve China’s possible lockdown of more major cities outside of Shanghai against variants of Covid- 19 and the conflict between Ukraine and Russia.
South Korea’s outbound shipments to China fell 3.4% year-on-year in April following the lockdown of Shanghai, one of China’s biggest logistics hubs, according to meeting participants and the Ministry of Trade, Industry and Energy.
Participants raised the possibility that the Chinese government’s restriction on people’s movements could expand to Beijing and other major cities after the Labor Day holiday in early May.
The conflict in Ukraine has also led to a drop of more than 70% in South Korean exports to Russia.
In the first 25 days of April, a 97.3% year-on-year decline was reported in auto exports, 87.4% in auto parts and 89.2% in steel, the ministry said. The figures come after economic sanctions against Moscow by the international community, including Seoul.
A longer-than-expected Ukrainian conflict could have negative effects on the nine countries of the Commonwealth of Independent States – Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan and Uzbekistan – whose economies depend heavily on that of the Russia.
Participants predicted that an unfavorable ripple effect between these countries could deal a blow to South Korea in terms of exports and imports.
In addition, Indonesia’s suspension of palm oil exports could trigger a critical problem in the global supply of palm oil, which is used for the production of many Korean cosmetics, detergents and instant food products.
This could lead to higher import prices for palm oil and alternatives like sunflower oil into the country, with obstacles emerging to meet global demand for Korean and other cosmetics.
South Korea is also experiencing difficulties in its trade with Myanmar, whose current administration has suspended settlement via foreign currency, participants at the meeting said. The situation could lead to a drop in exports to Myanmar and a problem in importing raw materials from the Southeast Asian nation.
In the January-April period, South Korea recorded a cumulative trade deficit of $6.6 billion amid rising import prices and export problems in some destinations.
It is quite possible that the increased uncertainty will have negative effects on South Korea, whose economy is highly dependent on exports, the trade minister said.
The government “will provide export-oriented enterprises with liquidity and marketing support, in coordination with relevant ministries and export promotion agencies,” Yeo said.
Some critics, citing the recent ongoing trade deficit, say the government has been lukewarm in taking quick action.
THE KOREA HERALD/ASIA INFORMATION NETWORK