Korean products have continued to witness their market share fall in the U.S. over the last three years, crowded out by exports from emerging economies. What's more worrisome is that a U.S. economic slowdown driven by the subprime mortgage crisis might have negative implications on Korean goods. The logic is that Americans would prefer lower-priced products as their consumption declines amid the housing credit turmoil.
According to the Korea International Trade Association (KITA), Korean exports took a 3.14-percent share in the U.S. market in 2004, up from 2.94 percent in 2003. But the share has continued to drop for three consecutive years ― 2.62 percent in 2005, 2.47 percent in 2004 and 2.43 percent in 2007. Particularly, the market share of electric and electronics goods ― the nation's major export items ― plunged from 9.25 percent to 5.37 percent. That of textile products fell by 3.78 percentage points. Automobiles and machinery also suffered from a sizable fall.
There is no doubt that Korean products are losing price competitiveness to goods made in China, India, Brazil, Vietnam and other developing countries. Soaring prices of crude oil and other natural resources have raised production costs. Against this backdrop, Chinese products' market share in the U.S. jumped from 13.38 percent to 16.46 percent. Indian goods' share rose from 1.06 percent to 1.23 percent, while that of Brazil's products edged up from 0.81 percent to 1.31 percent. Vietnamese exports' market share increased 0.36 percent to 0.54 percent.
What's noteworthy is that eight countries having free trade agreements (FTAs) with the U.S. have enjoyed an average 0.75 percent increase in their products' market share there. In short, FTAs have contributed to sharpening the competitive edge of those countries' products. Thus, the Lee Myung-bak government is required to roll up its sleeves to get the ratification of the Korea-U.S. FTA from the National Assembly. The George W. Bush administration must also do more to obtain approval of the mutually beneficial trade deal from Congress.
However, the FTA is not a panacea to all the problems of the country that is sandwiched between advanced countries and rapidly emerging economies. China, India and other developing countries are trying to catch up with South Korea in industrial development, economic growth and trade. It is getting more difficult for Korean products to compete with their counterparts from newly industrializing countries.
Local companies should realize that their survival in the intensifying global competition will depend on their ability to make quality products and develop technology. The government and businesses ought to join hands to step up research and development (R&D) in a bid to strengthen the nation's international competitiveness.