Intra-industry
trade between South Korea and Vietnam·China Increased... Need to Stabilize
Supply Chain
-Over the past 7 years, the dependence on
intra-industry trade has risen 16.8%p in Vietnam and 8.9%p in China... -
- Expansion of exports and imports between Korea and
both countries, mainly in the high-tech electronics and communication
industries -
It
has been pointed out that strategies for the global supply chain stabilization
are required as the degree of dependence on intra-industry trade is on the
increase between South Korea and Asian economies such as Vietnam and China.
“Intra-industry
trade” can be defined as simultaneous import and export of similar goods within
the same industry. For instance, South Korea exports and imports semiconductor
chips to and from China at the same time. This practice can be categorized as
intra-industry trade. As intra-industry trade expands, supply and demand shocks
from overseas markets are more likely to spread to the domestic market, and the
possibility of synchronizing the domestic market to keep up with overseas
economic fluctuations increases. Therefore, supply chain management becomes
critical.
According
to a report titled “Current Status of Intra-industry trade in South Korea and
Supply Chain Management Strategy” issued by the Institute for International
Trade (President: Choi Yong-min) of the Korea International Trade Association
on December 16th, South Korea's reliance on intra-industry
trade reached 42.7 percent of total exports as of 2019 and has been steadily
rising since it recorded 31.8 percent in 2008 as Korean export companies have
established overseas production bases and the increased intermediate goods
trade has expanded the division of labor between countries.
The
dependence on intra-industry trade of South Korea with four trading partners
was as high as China (39.6%), Japan (32.8%), Vietnam (25.1%) and the United
States (20.7%). In particular, the reliance on intra-industry trade with
Vietnam and China jumped 16.8 percentage points and 8.9 percentage points from
2012 to 2019, respectively. In contrast, the dependence on intra-industry trade
with advanced countries such as the United States and Japan remained unchanged.
The
report stated, “The intra-industry trade with Vietnam and China rapidly
expanded mainly in the electrical and electronics sectors,” and elaborated,
“With active trade in the semiconductor industry with China, the share of
semiconductor products within the industry increased from 48.3 percent in 2012
to 62.0 percent in 2019, and with Vietnam, intra-industry trade of home
appliances (4.2% → 63.9%) and wireless communication devices (20.6% → 64.6%)
increased significantly.”
As
another feature, the report pointed out, “When it comes to intra-industry trade
with Vietnam and China, South Korea imports low-price products from them and
exports high-price products to them,” and added, “'Vertical intra-industry
trade with superior quality' is emerging, as the export unit price is higher
than the import unit price.”
Kang
Sung-eun, a researcher at the Institute for International Trade of the Korea
International Trade Association, said, “The high degree of reliance on
intra-industry trade may expand supply chain risks. It is required to closely
monitor the industries with high intra-industry trade dependence and work on
various strategies to stabilize the supply chain.”
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