The Peninsula

South Korea’s Trade Vulnerabilities on Display

What Happened

• The U.S. government asked semiconductor manufacturers to voluntarily share their client list, inventory status, and other confidential information.
• This includes South Korean firms like Samsung and SK Hynix.
• South Korea is concerned that the request would reveal these firms’ trade secrets to rivals.

Implications: South Korea approaches commercial engagement with trade partners with the assumption that their policymakers will look at international trade through a consistent lens. After years of moving production to the United States to diffuse criticism around its trade surplus, Korean firms appear caught off guard by Washington’s heightened focus on supply chain stability. During the Trump and Obama years, criticism from the U.S. government and other stakeholders on the bilateral trade relationship focused on South Korea’s trade surplus. However, the heightened demand for sensitive products like semiconductor chips during the COVID-19 pandemic shifted the focus to transparency around production and supply chains. South Korea failed to foresee this shift: tellingly, many Korean chipmakers are characterizing the U.S government’s request as “unprecedented.”

Context: Korea is heavily dependent on exports. According to the Korean Statistical Information Service, the country’s export dependence in 2019 was 32.94%. This is much higher than the dependence of the United States and Japan on exports, which sits at 7.67% and 13.93% respectively. This helps explain why Korea and its firms are so sensitive to the U.S. request for disclosure – the fear is that Korean firms might lose trade competitiveness as a consequence.

This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here.

Korea View was edited by Yong Kwon with the help of Janet Hong and Yubin Huh. Picture from the flickr account of Samsung Newsroom