Supply Chain Uncertainty Creates a 'Thin Ice' Situation... 86% of Export Companies Expect No Improvement in Trade Environment This Year

KCCI's '2022 Global Trade Environment Outlook and Corporate Response Tasks' Presentation
Top Cause of Trade Environment Deterioration: 'Ongoing COVID-19 Situation'
Strongest Demand to Government: 'Addressing Supply Chain Instability'

[Asia Economy Reporter Hwang Yoon-joo] Nine out of ten export companies expect the trade environment this year to be no better than last year. Amid the ongoing COVID-19 pandemic and the global supply chain restructuring, export companies are concerned about slipping on the thin ice-like trade environment this year.

According to the survey results of the "2022 Global Trade Environment Outlook and Corporate Response Tasks," conducted by the Korea Chamber of Commerce and Industry targeting 300 export companies, 85.7% of respondents answered that the outlook for changes in the trade environment would be "similar to last year (55.0%) or more difficult (30.7%)." On the other hand, only 14.3% of companies expected it to improve compared to last year.

The top cause of trade environment deterioration is the 'continued COVID-19 situation' (49.7%)... followed by 'logistics difficulties' (19.7%) and 'rising raw material prices' (10.4%).

Regarding the expected recovery period from the COVID-19 pandemic, 37.3% answered "within 2 years," and 33.3% said "within 1 year," indicating low expectations for early normalization.

To prepare for this year's challenging trade environment, companies ranked "substitution and supplementation of global supply chains" (40.6%) as their top response strategy. Diversifying entry regions through "new market entry" (31.3%) was the second most cited, followed by "securing advanced technology" (14.7%), "responding to environmental and climate issues" (6.7%), and "digital transformation" (4.7%).

The regions where companies recently substituted or supplemented their supply chains were led by "Europe" (28.3%). This was followed by "ASEAN and other New Southern regions" (23.9%), "the Americas" (21.7%), "China" (10.9%), and "domestic" (8.7%).

Companies Most Want the Government to Strengthen 'Economic Security'

In this situation, Korean companies most frequently expected the government’s trade policy to focus on "strengthening economic security, including responding to supply chain instability" (50.3%). Next were "strengthening the utilization of existing agreements such as FTAs" (28.0%), "response policies related to CPTPP accession" (9.3%), "increasing participation in new regional economic forums such as the Indo-Pacific Economic Framework" (7.3%), and "participation in and active response to new trade norms such as labor, environment, and digital agreements" (5.1%).

Professor Ahn Deok-geun of Seoul National University Graduate School of International Studies stated, "In 2022, as the U.S. Indo-Pacific Economic Framework strategy is fully implemented, the digital trade order led by advanced countries is expected to spread further. Given that the WTO’s functions have not been restored, the instability of supply chains related to China is likely to intensify, making it a critical time to operate industry-specific supply chain response systems between the industrial sector and the government."

75% of Companies Agree on the Necessity of CPTPP Accession... Conditional on Stakeholder Consultation and Domestic Industry Support Systems

Meanwhile, most companies surveyed agreed with the government’s recent official push for CPTPP accession. When asked about the necessity of joining, 74.7% agreed it was "necessary," while only 21.0% viewed it as "unnecessary."

However, as precautions regarding CPTPP accession, companies cited "sufficient consultation with stakeholders" (37.0%) and "establishment of support systems to enhance domestic industry competitiveness" (31.7%), indicating that protective measures for industries should precede accession as prerequisites.

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