Energy Imports Increase... US Trade Balance Surplus Hits Lowest Since Korea-US FTA

Trade Hits All-Time High
Services Still in Deficit

Donald Trump, President of the United States. (Photo by AP Yonhap News)

[Asia Economy Reporter Moon Chaeseok] Last year, the eighth year since the Korea-US Free Trade Agreement (FTA) came into effect, the trade surplus with the United States recorded the lowest level ever. Although trade volume was at an all-time high, the trade balance worsened. Exports remained steady while imports increased.

According to the Ministry of Trade, Industry and Energy on the 15th, last year's trade surplus with the US was $11.4 billion, down 17.4% from $13.8 billion the previous year. This was the lowest since the Korea-US FTA took effect in 2012 and marked the fourth consecutive year of decline. It was 55.8% less than the peak of $25.8 billion in 2015.

The trade surplus decreased due to increased imports. Imports rose 5.1% from $58.9 billion the previous year to $61.9 billion. Imports of crude oil (99.7%) and liquefied petroleum gas (LPG, 10.6%) increased.

The government has been promoting the expansion of imports of US raw materials such as gas since 2017, after US President Donald Trump raised concerns about the trade deficit with Korea.

In addition, imports of aircraft and parts (13.3%), meat (6.5%), and automobiles (4.4%) also increased. Consequently, last year, the US market share in Korea rose to 12.3% from 11% the previous year, widening the gap with Japan, which ranked third.

The chronic deficit in the US service trade balance also remained negative. The latest record in 2018 showed a deficit of $14.3 billion, due to increased royalties from intellectual property rights and travel income.

However, this was an improvement compared to the $16.3 billion deficit in 2017, the largest since the FTA took effect. Exports increased 9% from $14.9 billion to $16.3 billion, while imports decreased 2.2% from $31.3 billion to $30.6 billion.

Since the FTA came into effect, the average service trade deficit has increased by 13.2% compared to 2011.

As a result, despite the record-high trade volume of $135.2 billion, the trade balance inevitably worsened. This was a 2.7% increase from the previous record of $131.6 billion the year before.

Exports rose 0.9% from $72.7 billion to $73.3 billion. Petroleum products (20.7%) and plastic products (15%) increased, while wireless communication devices (-28.6%), computers (-10%), and semiconductors (-7.5%) decreased.

As of the third quarter of last year, Korea's cumulative investment in the US was $10.25 billion based on reported figures, up 20.4% from $8.51 billion in the same period the previous year. According to the Ministry of Trade, Industry and Energy, the US is Korea's largest overseas direct investment destination.

From the FTA's implementation in 2012 to the third quarter of last year, cumulative investment in the US totaled $74.63 billion, approximately 2.7 times (167.8%) higher than the $27.87 billion accumulated from 2004 to 2011 before the FTA.

Major investments after the FTA include Lotte Chemical's construction of a petrochemical plant in Louisiana (2015?2018, $3.1 billion), Samsung Electronics' acquisition of Harman (2016, $8 billion), and KCC's acquisition of Momentive (last year, $3 billion).

US investment in Korea last year reached a record high of $6.84 billion based on reported figures, up 16.4% from $5.88 billion the previous year.

Cumulative US investment in Korea from 2012 to last year totaled $37.59 billion, approximately double (102.2%) the $18.59 billion accumulated from 2004 to 2011 before the FTA.

This content was produced with the assistance of AI translation services.