Market opening, fast growth create U.S. opportunities - Korea - World Trade Outlook

U.S. exports to Korea grew by nearly 40 percent in 1988, driven by the yen/dollar realignment, continuing high growth rates, continued market liberalization resulting in better market access due to lower tariffs and fewer import restrictions, and Korea's efforts to diversify import sources. These factors will continue to have a beneficial effect on U.S. exports, which are projected to increase nearly 35 percent in 1989, reaching some $15 billion by year-end.

Korea's economy has been booming for the past three years, growing at an annual rate of 12 percent. Predictions are that the economy will grow at a slightly slower 8 to 10 percent in 1989. The won should continue its gradual appreciation (approximately 16 percent in 1988), thereby improving the competitiveness of U.S. goods in Korea's market.

A number of developments point to improved access for U.S. goods and services. Korea's recently instituted fiveyear tariff reduction plan will gradually reduce tariffs to between 7 to 8 percent by 1993. On Feb. 25, the Korean govemment reduced tariffs on 212 categories of products, including agriculture products, cosmetics, home appliances, and data processing equipment. Import licensing restrictions have been eased significantly-the liberalization ratio (that is, the percentage of goods which are "automatically approved" for issuance of import licenses over all goods) was expanded to 95 percent in 1988.

The Korean govemment has also committed itself to reducing other non-tariff barriers. The import surveillance system has been eliminated, and the govemment is revising its "special laws" which embody health, safety, and other regulatory standards in order to ease the traditionally restrictive impact of these laws on imported products.

In an effort to reduce its current trade surplus with the United States, which totaled $8.9 billion in 1988, the Korean government has initiated a program of "import diversification." This program is specifically designed to encourage substitution of those products imported from Japan with products from the United States and other countries. To support this program, the government established a special $5 billion financing facility which provides preferential financing to Korean firms purchasing goods from sources other than Japan (the United States will be the largest beneficiary of the program). Finally, the government will sponsor a series of "buying missions" to the United States in 1989. Product areas to be covered by these missions include electronics, pollution control equipment, and machinery.

Korea also has made progress toward providing protection for intellectual property. In July 1987, Korea enacted patent, trademark, and computer software protection laws as part of an agreement with the United States. The Korean government also agreed to provide special protection for certain U.S. patented products ineligible for protection under the new law. In the same year, Korea joined several international intellectual property conventions, including the Universal Copyright, the Geneva Phonogram and Budapest Conventions, and the World Intellectual Property Organization. The Korean government has recently established an interagency task force headed by the Ministry of Trade and Industry to ensure effective enforcement of intellectual property laws. The United States will continue to monitor closely the actions of the Korean govemment on intellectual property protection.

The situation for investment is gradually improving. With respect to services, life insurance firms can now open branch offices and enter into joint ventures. In advertising, minority equity investment and repatriation of profits is now permitted. The financial services sector (stocks, securities, etc.) is still closed to foreign participation, but the Korean govemment has indicated that it intends to fully liberalize this market by 1992.

Foreign investment in the more traditional manufacturing joint ventures continues to grow, especially in the chemicals, electronics, and medical equipment sectors. U.S. investment in Korea has been steadily increasing both in the number of investors and dollar volume. U.S. investment project applications approved by the Korean government more than doubled between 1986 and 1988 from $125 million to $280 million despite a boisterous political transition and growing labor activity. With the exception of a few service sectors of interest to U.S. firms, the Korean market is almost fully open to foreign direct investment.

Best prospects for U.S. exporters during the coming year include electronic components and parts, auto parts, chemicals, aircraft and avionics equipment, and synthetic resins. Prospects continue to be strong for Korea's traditional imports, such as petroleum and related products, steel and iron scrap, hides and skins, and pulp and waste paper.

The Department of Commerce's recently initiated trade promotion program, EXPORT NOW-KOREA, offers U.S. firms a broad range of programs, including seminars, trade missions, and product exhibitions, which are designed to help U.S. firms increase their exports to Korea (see Dec. 5, 1988, edition of Business America). Upcoming events include a medical/dental equipment show (April), a conference on selling auto parts to Korea (May), an analytical and scientific equipment show (May), a computers and peripherals show (June), and an auto parts and accessories show (November). For further information on these programs, contact the Korea Desk at (202) 377-4957.

COPYRIGHT 1989 U.S. Government Printing Office
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