Apparel Sourcing Intelligence - Worldwide

China-Korea trade collapses after a year’s “free trading”

Korean exports to China fell 10.9% in the first year of a free trade deal between the two countries. Chinese exports to Korea fell just 4.8%.

 The graph prepared from data reported by the Korea International Trade Association compares trade in the first eleven months of 2016 with the whole of 2015, and so exaggerates the collapse of Korean exports: the China-Korea trade deal came into effect in January 2016. The graph does however show how Korean exports to China were already falling before the deal was signed, while Chinese exports to Korea were marginally growing.

Korean officials put the best light on the deal: Korea’s  Ministry of Trade, Industry and Energy (MTIE) and Korea Customs Service claimed “In comparison with the overall decline in exports to China, the decline in exports in items benefiting from the FTA has been relatively small. The FTA has served to shore up exports to China.”

But overall, Korea’s 10.9% decline in exports to China was greater than the 7% decline for all South Korean exports over the same time. It was also larger than the 5% decline in exports to the US – South Korea’s second biggest trade partner after China.

The deal covers only 5,000 items, and excluded areas where South Korea holds a technological advantage, such as semiconductors, flat panel displays, and cars. In the past year, Korea’s exports of these products to China have shown a clear decline.

The poor results of the trade deal follow similarly limited results from Korea’s trade deals with the US and the EU. The announcements came as Korea was publicly showuing enthusiasm for wider ranging trade deals with China and Japan, and throughout the Pacific