Korean exports to 'excel;' U.S. prospects are strong

Korean Exports to "Excel;' U.S. Prospects Are Strong

U.S. trade with Korea should expand rapidly in 1986. U.S. exports to Korea can be expected to rise approximately 5 percent to reach $6.25 billion. U.S. imports, on the other hand, will probably increase between 12 and 15 percent to exceed $12 billion. Thus, the bilateral trade deficit is expected to grow from $4.8 billion in 1985 to about $6 billion in 1986.

U.S. exports 1985--$5,956 million

U.S. imports 1985--$10,713 million

Korea's GNP growth rate is not expected to surpass last year's 5 percent, sluggish by recent standards. This is due to a number of factors. First, a heavy external debt burden will preclude significant expansion funded by additional borrowings. Second, Korea's major trade partners, the United States, Japan and the Middle East, will be unable or unwilling to absorb dramatic increases in traditional Korean exports. Third, the domestic economy will be able to generate only limited growth due to fears of inflation and slack consumer demand. On the other hand, Korea's burgeoning automobile sector should contribute substantially to medium-term growth. In 1986, Hyundai, Korea's largest private corporation, is expected to export approximately 100,000 cars, the Pony Excel, to the U.S. market alone.

As a result of uncertain export prospects, the Korean government intends to pursue aggressive economic policies. Money supply growth in 1986 is targeted at 12 to 14 percent. Fiscal policy will be mildly expansionary with a 16 percent increase in the funding of public projects.

The Korean government has also liberalized foreign investment regulations to induce capital inflow. A total of $532 million, over $100 million from the United States, entered the country in 1985. Korean corporations have also been actively investing abroad. Pohang Steel Corp., for example, entered a $300 million joint venture with U.S. Steel to build a finishing plant in California. Hyundai also plans to open an automobile assembly plant in Canada.

U.S. exporters find a favorable environment in Korea. The recent 20 percent depreciation of the dollar relative to the yen may allow U.S. suppliers to replace the Japanese in some sectors. High-technology exports, in particular, are likely to benefit from the currency adjustment. We expect good prospects in the following fields: analytic/scientific instruments; electronic industry production and test equipment; medical, telecommunications and materials handling equipment; computers and peripherals; industrial process controls; construction and mining equipment; food processing and packaging, metalworking, printing and graphic arts equipment; and electric power generation facilities.

New opportunities will materialize as a result of Korea's ongoing market liberalization measures. Restrictions on imports of articles such as sporting goods, processed foods, and kitchen articles are to be removed in July 1986. Also, U.S. raw material and capital goods suppliers should be able to increase sales over the coming year.

U.S. sales promotion events in Korea will focus on the following sectors in 1986: construction, office technology, automobile parts and accessories, electronics, restaurant and hotel equipment, process control instrumentation, coal and telecommunications equipment.

For further information, contact the Korea desk officer at (202) 377-4399.

COPYRIGHT 1986 U.S. Government Printing Office
COPYRIGHT 2004 Gale Group