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South Korea, US Trade Is Mutually Beneficial: Report

By February 22, 2017 at 4:47 am
South Korea’s value-added trade surplus with the US in 2014 accounted only 20.8 percent of its total trade surplus, far lower compared to that of China and Japan. (Photo : Korea Portal)

Bilateral trade between South Korea and the United States continues to be mutually beneficial for the two countries as the trade surpluses primarily come from Korean exports of intermediate goods that are needed by American manufacturers to make their own finished goods, according to a report by Korea International Trade Association (KITA) released Wednesday.

In 2015, 46.3 percent of overall outbound shipments from South Korea to the US are intermediate products, compared to just around 37 percent of total US imports, according to the KITA report. 

A huge percentage of intermediate goods may be a sign that South Korea's exports are items that the US mostly need, the report said.

In the first 10 days of February, South Korean overall outbound shipments surged 72.8 percent from a year ago, customs data showed, keeping the upward momentum since November. 

The on-year gain in the country's exports increased from 11.2 percent last month, 6.4 percent in December and then 2.5 percent in November.

Even as the recent gains were partially due to a lower base from the previous year when trade underperformed, South Korean trade officials still welcomed the increase in recent months as the government strives to boost exports to offset the effects of weak domestic demand on the country's economy.

The new US administration, however, has considered introducing a so-called border adjustment tax, citing chronic trade deficits by the US with key trading nations, such as South Korea.

The KITA report, however, said trade balance needs to be viewed in terms of value added.

South Korea's trade surplus with the US in 2014 stood at US$34.5 billion, but its value-added trade surplus was just $7.2 billion, accounting 20.8 percent of the total. The percentage is far lower compared to other US trade partners.

In the same year, China's surplus of value-added trade comprised for nearly 54 percent of its overall trade surplus with the US, while that of Japan accounted for over 30 percent of the total, the report said. 

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