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Shipped docked at a port in the city of Busan can be seen being loaded with containers in this undated photo. (Yonhap News)

South Korea’s exports and imports are more concentrated on certain items than any country in the Group of Seven (G7), a new report has found. The findings suggest that Korea may be more vulnerable to foreign risk. The same analysis found Korea’s imports and exports were also highly concentrated in specific countries.

According to a report published by the Korea Enterprises Federation (KEF) on Sunday titled “International Comparison of Korea’s Import/Export Concentration and Implications,” the level of concentration in Korean export items in 2020 (under the Herfindahl-Hirschman Index) was 877.3 — higher than Japan (785.6) and Germany (536.8). The G7 countries that were lower than Germany were Canada (508.5), the UK (422.2), the US (410.7), France (394.4) and Italy (391.6).

The Herfindahl-Hirschman Index, which is a measure of market concentration, is found by squaring the market share of every item or region and then finding the sum. The higher the resulting figure, the more concentrated imports and exports are in a given item or region. For this comparative analysis, the KEF calculated import/export concentration for items and regions in the 38 member states of the Organisation for Economic Co-operation and Development using UN statistics.

Over the past ten years, the concentration of Korea’s export items has continued to grow, from 740.8 in 2010 to 794.6 in 2015. That reflects the huge and growing share of Korea’s semiconductor and automotive industries.

Korea’s concentration in import items was calculated as 563.4, which was also higher than all G7 countries, including the UK (478.4) and the US (454.7). But the concentration had fallen since 2010 (739.4) and 2015 (618.2). Import concentration presumably fell along with the share of petroleum imports as global oil prices fell in 2020. Since oil prices have risen considerably in 2021, concentration in import items has likely gone up, too.

“Korea is liable to suffer greater negative shocks from fluctuations in oil prices or instability in the supply chain for intermediate goods because raw materials and intermediate goods account for a higher share of imports there than in advanced economies,” the KEF said.

The report calculated Korea’s export concentration on specific countries at 1076.4, which was lower than Canada (5,427.0) among the G7 countries but higher than the other six, including Japan (1,018.0) and the US (736.0). Export concentration on specific countries edged up again, from 881.9 in 2010 and 995.3 in 2015.

That reflects the fact that 40% of Korea’s exports are bound for two countries — China (25.9%) and the US (14.5%). As a result, Korea is fairly vulnerable to the negative impact of the two countries’ trade war.

The report found that Korea’s import concentration on specific countries was 910.4, which was lower than Canada (2,648.5) and Japan (951.5) among the G7 countries, but higher than the rest, including the US (810.5) and France (720.1). The level of concentration was higher than in 2010 (752.8) and 2015 (775.7).

“That suggests that the stable supply of items essential for Korean industries is more likely to be challenged by problems in the supply chains of the countries in question,” the KEF explained. The main countries on which Korea relies for its imports are China (23.3%), the US (12.4%) and Japan (9.8%).

“In order to mitigate foreign risk factors including the instability in the global supply chain and the trade war between the US and China, we need to concentrate more on diversifying our trade market. We should also take measures to support investment and R&D in promoting new technologies and industries; strengthening the competitiveness of our materials, parts and equipment industries; and diversifying our sources of energy,” said Ha Sang-woo, head of economic research at the KEF.

By Kim Young-bae, senior staff writer

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