US Loses Clout on Korean Economy
By Lee Hyo-sik
Staff Reporter
South Korea was able to rise from the ashes of the 1950-53 Korean War on the back of international aid, most of which came from the United States.
The world's largest economy imported Korea's agricultural products, garments and other manufactured goods from the 1950s through the '70s on favorable terms to help the Asian nation outpace the Communist North Korea.
The U.S. also provided Korea with flour and other basic necessities at lower costs to help it feed its people. It was the country's largest trading partner over the past five decades.
But its influence in what is now Asia's fourth-largest economy has been diminishing rapidly over the last 10 years, with Korea expanding trade relations with China, Russia and other emerging economies.
Analysts here say that the U.S. could lose more of its economic clout in Korea if the administration of President Barack Obama and the U.S. Congress continue to delay the ratification of the Korea-U.S. free trade agreement (FTA).
They say the European Union and China, which compete with the U.S. for global hegemony, will establish closer economic ties with Korea if the U.S. heads toward protectionism and places greater priority on domestic populism than trade.
According to the Korea Customs Services (KCS) Monday, Korea's trade dependence on the U.S. stood at 9.7 percent in 2009, down from 24.4 percent in 1991. Korea shipped about 10.36 percent of its total outbound shipments to the world's largest economy, down from 25.8 percent over the same period, while taking 9 percent of its total imports from the U.S., down from 23.18 percent.
On the other hand, Korea's trade dependence on China has increased at an explosive pace since the two countries began diplomatic relations in 1992.
South Korea's exchange of agricultural and industrial goods with the world's fastest-growing economy reached 20.5 percent last year, up from 2.9 percent in 1991.
Korea exported 23.9 percent of its outbound shipments to the neighboring country in 2009, up from 1.4 percent, with 16.8 percent of its imports coming from China, up from 4.2 percent.
The U.S. has become less important to Korea economically over the years, with the latter increasingly relying on China, the European Union and other economies for growth.
"Korea is the sixth-largest trading partner of the U.S. and a key Asian economy strategically located in Northeast Asia. American policymakers and businesses should be alert over their diminishing economic influence over Korea," LG Economic Research Institute managing director Oh Moon-suk said.
Oh said if the U.S. continues to remain reluctant to sign the free trade pact with Korea, the Asian nation will continue to move closer toward China and the European Union, adding the EU will likely sign a free trade accord with Korea before the U.S. does.
Touching on Korea's growing trade ties with China, he said Beijing has emerged as the country's largest trading partner in just over 10 years after the two opened their borders to each other in 1992.
"Korea's growing trade reliance on China was also the result of the nation's efforts to diversify its export destinations, which proved to be quite successful. The country should continue to expand economic ties with China and try to establish an even larger presence there," Oh said.
The economist stressed domestic businesses should take advantage of the world's fastest-growing economy to become globally competitive.
"But at the same time, they will be affected more severely if something goes wrong in China. To hedge against the growing China risk, Korean firms should continue to explore new foreign markets and establish a presence in countries in the Middle East and South America," he said.