Notwithstanding the global financial crisis, Korea remains a leading market for U.S. exports. Korea is the world’s 13th largest economy and the 8th largest U.S. trading partner. Total trade between Korea and the United States surpassed $82 billion in 2008; U.S. exports this past year were $34.9 billion. Korea’s resiliency is major factor to consider during these times of economic uncertainty. In 1997, Korea faced a similar crisis only to emerge as one of the strongest economies in the world. In contrast to earlier projections of 5-7% GDP growth, recent assessments anticipate a 2-4% negative GDP growth for 2009. These figures are in line with similar declines across Asia.
The U.S. and Korea concluded negotiations in 2007 on a free trade agreement to lower tariff rates on 95% of all consumer and industrial products, improve transparency and intellectual property rights, as well as address standards and regulations. The agreement is awaiting ratification by both the Korean and U.S. legislatures. The U.S. International Trade Commission projects upwards of $10 billion annually in additional U.S. exports resulting from the FTA.
Several developments in 2008 should have a positive influence on U.S. exports. First, Korea joined the Visa Waiver Program, substantially easing travel to the United States, and strengthening tourism and business travel. The United States is already the leading destination worldwide for Korean students attending basic and higher education, and Koreans constitute the largest group of foreign students in the U.S. A second factor is the Korean Government’s major strategy targeting 22 engines of growth in sectors such as energy and environment, transportation systems, information technology, convergent technologies, bio-industry, and knowledge-based services. While aimed at stimulating domestic growth, significant components of this national strategy are based on attracting international partners and acquiring foreign technology. Most, if not all, of the 22 targeted sectors are in areas of U.S. competitive strength.
U.S.-Korea trade is highly diversified, reflecting a broad spectrum of products and services that satisfy sophisticated consumer needs and state of the art industrial demands. Over one-third of all bilateral trade can be categorized as “advanced technology products.” Over the past decade, U.S. exports have supported product development and other forms of R & D in Korea, setting the stage for long-term relationships with Korean partners in high market potential sectors such as energy, medicine, transportation, and telecommunications.
The global economic downturn is having an impact on Korea’s trade. For the first two months of 2009, Korean exports have fallen 25%. At the same time Korean financial institutions remain fully solvent, but cautious and conservative in their lending practices. Faced with declines in exports, many corporations are re-orienting their business plans to weather the turbulent economic conditions. Another challenge facing U.S. exporters is the rapid decline of the WON/US Dollar exchange rate at publication time, effectively adding a 30-40% premium on U.S. dollar denominated exports. Finally, Korea’s testing and standard requirements can be challenging. Depending on the sector and circumstance, U.S. companies should be alert to unique standards, less than transparent regulations, and pressures to reduce prices.
However, firms that are innovative, patient, and exhibit a commitment to the Korean market have found business to be highly rewarding and Koreans to be loyal customers. With the conclusion of the Korea-U.S. Free Trade Agreement (KORUS), Korea’s attractiveness as a market will further improve; U.S. products will be more cost-effective; and two-way trade will certainly expand.
U.S. exporters of agricultural commodities while facing market challenges can do very well in this down market. Please see the latest “Exporter Guide” prepared by the Foreign Agricultural Service’s Agricultural Trade Office in Seoul for updated information on these topics.
U.S. companies will find excellent niche markets for their goods and services across virtually every sector.
Best Prospects for U.S. industrial exports are listed below in alphabetical order:
- Automotive Parts and Accessories
- Broadcasting Services and Equipment
- CNC Machine Tools
- Computer Software
- Defense Industry Equipment
- Drugs and Pharmaceuticals
- Education and Training Services
- Medical Equipment and Devices
- Pollution Control Equipment
- Security Services and Products
- Specialty Chemicals
- Travel & Tourism
- Wireless Broadband Equipment and Services.
The U.S.-Korea Free Trade Agreement (KORUS-FTA), awaiting final legislative ratification by both the U.S. and Korea, aims at the removal of trade and investment barriers, thereby easing American business access to the Korean market. More information is available from the office of the United States Trade Representative.
Korea is a highly advanced, tech-oriented economy that can utilize and generate significant demand for state of the art technologies.
Korea has several mega-projects under way aimed at establishing the country as an international business center for North-East Asia, as well as a major financial and logistics hub. Additionally, one of the largest U.S. base relocation projects in the world is proceeding with the planned move to Pyongtaek, located approx. 50 miles south of Seoul. The new site will consolidate U.S. military forces as well as accommodate family-based housing for over 24,000.
Korean fascination with the “American Lifestyle” continues to draw interest and attention among Korean consumers. See CS Korea for more information.
Market Entry Strategies
- Local representation is essential for the success of American firms in the Korean market.
- The most common means of establishing a presence in Korea include: retaining a manufacturers’ representative or stocking distributor; naming a registered trading company as an agent; or, establishing a branch sales office.
- Business relationships are built on personal ties. Companies who have substantial business interests are advised to visit Korea in order to establish stronger commercial relationships as well as obtain a first-hand acquaintance with business conditions.
- U.S. companies are strongly encouraged to take advantage of the U.S. Commercial Service’s support for U.S. exporters. The U.S. Commercial Service offers a wide range of marketing services such as arranging contacts with potential buyers, distributors and importers.