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Archive:South Korea-EU - international trade in goods statistics

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This article analyses the European Union (EU) trade in goods with South Korea. It provides information about the impact on trade in goods of the Free Trade Agreement (FTA) with the Republic of South Korea that entered into force in July 2011, as the first of a new generation of FTAs signed by the EU.

The Free Trade Agreement between the EU and the Republic of Korea (EU-South Korea FTA) was launched in 2007 as part of the ‘Global Europe’ initiative. These agreements, based on solid economic criteria, represent a stepping stone for future liberalisation as they are also tackling issues which are not ready for multilateral discussion and are going beyond the market opening that can be achieved in the context of the World Trade Organization (WTO).

Accordingly, the EU-South Korea FTA is the most comprehensive free trade agreement ever negotiated by the EU. Import duties are eliminated on nearly all products and there is a far reaching liberalisation of trade in services covering all modes of supply. It includes provisions on investments both in services and industrial sectors, strong disciplines in important areas such as the protection of intellectual property (including geographical indications), public procurement, competition rules, transparency of regulation and sustainable development. Specific commitments to eliminate and to prevent non-tariff obstacles to trade have been agreed on sectors such as consumer electronics [1], automobiles, pharmaceutical products and medical devices and chemicals.

Table, Figure or Map X: Full title of the Table, Figure or Map
Source: Eurostat (educ_ilang)

Main statistical findings

EU and South Korea in world trade

Europe is the world’s largest exporter of goods and services, and is itself the biggest export market for around 80 countries. Trade is an important indicator of Europe’s prosperity and place in the world. In 2012 the EU recorded the world’s highest value for total exports of goods (EUR 1 683.1 billion). The EU-28 had also ranked first among world importers since 2008, but in 2012 the United States came in first with a slightly higher value (EUR 1 816.5 billion) than the EU (EUR 1 798.6 billion). Thus, in 2012, the EU-28 recorded a deficit of EUR 115.5 billion, the third highest deficit behind the United States and India (see Figure 1).

Over the last couple of decades, South Korea has developed into one of Asia’s leading economies. In 2012 it ranked fifth in the list of global exporters of goods (with a value of EUR 426.4 billion) behind the EU, the United States, China and Japan. South Korea also ranks fifth among global importers, with almost the same value (EUR 404.4 billion). South Korea’s trade surplus in 2012 therefore stood at EUR 22.0 billion.

The EU’s trade in goods

After the rapid decline of 2009, as a consequence of the global financial and economic crisis, the extra-EU trade in goods recovered in terms of both imports and exports. In 2013 imports showed a reduction in comparison to 2012, while exports continued to grow, even if at a reduced speed. As a result, in 2013 the EU trade balance was positive for the first time since the beginning of the series (2003). The lowest trade deficit was registered in 2003 (EUR 73.4 billion), while the highest was recorded in 2008 (EUR 276.1 billion) (see Figure 2).

Machinery and vehicles were the EU’s most exported products and made up 40.8 % of its total exports while other manufactured goods accounted for 22.1 % and chemical products for 15.7 %. Thus the share of manufactured products (SITC 5–8) made up 78.6 % of total EU exports in 2013. The most exported primary products (SITC 0–4) were food, drinks and tobacco (see Figure 3).

Manufactured goods (which include chemicals; machinery and transport equipment; and other manufactured goods) constituted the majority of EU imports (48.5 %) as well, with shares similar to that for exports. Machinery and vehicles and chemical products accounted for smaller shares, 25.8 % and 9.4 % respectively. The structure of imports however was slightly different from that of exports since the share of primary products (raw materials: food, drink and tobacco and mineral fuels) increased in recent years up to 39.7 % in 2013, while the respective share of manufactured goods declined. Mineral fuels, lubricants and related materials were the most imported primary products in the EU (29.6 %), followed by food, drinks and tobacco (5.6 %) and raw materials (4.5 %).

South Korea’s trade in goods

Figure 4 shows the evolution of South Korea’s global trade in goods for the years 2003–2013, a period during which a considerable increase in the traded value of goods was achieved. The upward trend was interrupted in 2009, when the global financial and economic crisis began. The values also declined in 2013, although South Korea achieved its highest trade surplus (EUR 33.2 billion) during that year. Another high trade surplus had been achieved in 2009 (EUR 29.0 billion) despite the lower imports and exports. The highest export and import values were recorded in 2012 (EUR 426.4 billion and EUR 404.4 billion respectively). Contrasting with the EU, South Korea’s trade balance has been positive throughout the period observed, except for 2008, when it was negative at EUR 9.0 billion.

In 2013, manufactured goods made up the majority of South Korea’s exports (87.8 %). Machinery and transport equipment were the most exported products and accounted for 54.6 % of the total exports while other manufactured goods accounted for 21.3 % and chemical products for 11.8%. The most exported primary products were food, drinks and tobacco (see Figure 5).

Manufactured goods also constituted the majority of South Korean imports with 53.4 %. They were however closely followed by primary products which made up 46.6 % of imports. Mineral fuels, lubricants and related materials were by far the most imported primary products in South Korea (35.0 %), followed by raw materials (6.9 %) and food, drinks and tobacco (4.4 %). Machinery and vehicles accounted for 26.1 %, other manufactured goods for 18.2 % and chemical products for 9.1 %.

EU trade in goods with South Korea

South Korea is the EU’s tenth largest trading partner while the EU is South Korea’s fourth export destination (after China, Japan and the United States). The importance of the relationship has been recognised with the establishment of a new institutional framework — the already mentioned FTA — to facilitate cooperation.

After slowing down in 2009 due to the global financial and economic crisis, trade flows between the EU and South Korea started to increase again in 2010. Despite the faster growth of EU-28 exports to South Korea, the value of South Korean imports continuously exceeded those of its exports by a considerable margin. Hence the EU-28 trade balance with South Korea was consistently negative until 2013 (see Figure 6).

For the period observed the EU-28’s highest trade deficit was recorded in 2006 (EUR 18.1 billion). In recent years the gap between the value of imports from and exports to South Korea has been narrowing. Between 2006 and 2013 the value of EU-28 exports to South Korea increased whereas that of EU-28 imports from South Korea decreased. As a result, in 2013 exports exceeded imports for the first time since the beginning of the series (2003). In 2013 the EU-28 recorded its highest value (EUR 39.9 billion) and reached a trade surplus of EUR 4.1 billion. In the period observed EU exports to South Korea enjoyed an annual average growth rate of 9.8 %.

Since the FTA entered into force in July 2011, EU goods exports to South Korea have increased considerably. The total value of exported goods from the EU-28 to South Korea was 42.7 % higher in 2013 than in 2010. The value of imports remained stable.

In 2013 machinery and transport equipment were EU’s most popular global exports and, with 49.0 %, they were also by far the most important exports to South Korea. Other manufactured goods accounted for 20.0 % and chemical products for 14.4 %. Thus, manufactured products made up the biggest share of EU exports to South Korea. Primary products followed with smaller shares: energy products accounted for 7.8 %, food, drinks and tobacco for .4.1 % and raw materials for 2.5 % (see Figure 7).

The product group machinery and vehicles made up the biggest share of EU imports from South Korea (62.1 %). Other manufactured goods and chemical products accounted for smaller shares (22.6 % and 8.6 % respectively). The pattern was quite similar to that of EU exports. The combined share of primary products made up 6.3 % of all EU imports.

EU imports of machinery and transport equipment and other manufactured goods from South Korea recorded higher values than export values resulting in trade deficits of 13.1 % and 2.7 % respectively. All other products recorded trade surpluses.

Following the entry into force of the FTA with South Korea, EU exports of liberalised products to South Korea, such as consumer electronics, automobiles, pharmaceutical products and medical devices and chemicals, have increased. The trade between the EU and South Korea is dominated by power/non-electrical machinery, chemicals, transport equipment, optical and photo equipment and base metals.

Major EU exports to South Korea were high-tech manufactured products like semiconductors, machinery, automobiles, ships, LCD and wireless communication devices.

EU imports from South Korea consisted mainly of textiles, consumer electronics and cars, oil, semiconductors and natural gas. Figures 8 and 9 display the trade between the EU and South Korea at a more detailed level. Products at SITC (level 2) with trade values of over EUR 0.5 billion are provided.

This development in the trade relation between the EU and South Korea results from the fact that machinery and appliances represent the sector with the largest reduction in duties. 70 % of those duties were removed as of the entry into force of the FTA. The chemical sector was the second largest beneficiary and will see a duties relief of EUR 175 million on top of EUR 143 million which were already removed. Other industrial sectors enjoyed lower absolute gains, but benefitted from considerable duty reliefs from the outset: textile exports saw 93 % of duties wiped away immediately, glass 85 %, leather and fur 84 %, footwear 95 %, iron and steel 93 % and optical instruments 91 %. [2]

Data sources and availability

The source for the statistics in this publication is essentially Eurostat. Data are collected by the competent national authorities of the EU Member States and compiled according to a harmonised methodology established by EU regulations before transmission to Eurostat. The statistical information is mainly provided by the traders on the basis of Customs (extra-EU) and Intrastat (intra-EU) declarations.

Context

The EU-South Korea Free Trade Agreement (FTA) entered into force in July 2011 and is the first completed agreement in a new generation of FTAs launched by the EU in 2007. It is also the EU’s first trade deal with an Asian country. This new generation of agreements goes further than previous agreements in lifting trade barriers. The Agreement eliminates tariffs for industrial and agricultural goods in a progressive, step-by-step approach. Only a limited number of agricultural products are excluded from tariff elimination. In addition to eliminating duties on nearly all trade in goods, the agreement addresses non-tariff barriers to trade. It also includes provisions on issues ranging from services and investments, competition, government procurement, intellectual property rights, transparency in regulation to sustainable development. [3]

The objectives of this agreement are:

  • to liberalise and facilitate trade in goods between the parties, in conformity with Article XXIV of the General Agreement on Tariffs and Trade 1994 (GATT1994);
  • to liberalise trade in services and investment between the parties, in conformity with Article V of the General Agreement on Trade in Services ( GATS);
  • to promote competition in their economies, particularly as it relates to economic relations between the parties;
  • to further liberalise, on a mutual basis, the government procurement markets of the parties;
  • to adequately and effectively protect intellectual property rights;
  • to contribute, by removing barriers to trade and by developing an environment conducive to increased investment flows, to the harmonious development and expansion of world trade;
  • to commit, in the recognition that sustainable development is an overarching objective, to the development of international trade in such a way as to contribute to the objective of sustainable development and strive to ensure that this objective is integrated and reflected at every level of the parties’ trade relationship; and
  • to promote foreign direct investment without lowering or reducing environmental, labour or occupational health and safety standards in the application and enforcement of environmental and labour laws of the parties. [4]

See also

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Notes

  1. ↑ ‘EU-South Korea Free Trade Agreement: a quick reading guide’, October 2010.
  2. ↑ http://trade.ec.europa.eu/doclib/docs/2011/october/tradoc_148303.pdf
  3. ↑ http://europa.eu/rapid/press-release_IP-12-708_en.htm.
  4. ↑ Free Trade Agreement (FTA) with the Republic of South Korea.


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