Cracks in the US-China International Division of Labor: "Urgent Need for Contingency Plans on Strategic Items"

Is There a Countermeasure for the 'Second Urea Solution'?

[Image source=Yonhap News]

[Asia Economy Reporter Oh Hyung-gil] It has been pointed out that to prevent a second urea solution crisis, strategic items should be identified by industry and emergency plans such as stockpiling should be prepared.

Kim Bau, a senior researcher at the Korea Institute for Industrial Economics and Trade, recently stated in the report "Analysis of Supply Chain Vulnerabilities and Ripple Effects in Korean Industry" that "the global supply chain vulnerability issue will continue for the time being," explaining that "this is because cracks have begun to form in the international division of labor centered on the United States and China."

According to the report, there are a total of 1,088 items requiring attention due to supply chain vulnerabilities related to China. Among these, 604 are intermediate goods, mainly related to mining and mineral metals. Representative items include urea solution, lithium, and magnesium.

Researcher Kim said, "Korea's intermediate goods supply chain vulnerability has increased compared to before and is more vulnerable compared to the United States or Japan," adding, "Korea's vulnerability to China is different from that of the U.S. and Japan in that it was formed through the Korea-China division of labor structure."

In other words, while the U.S. and Japan's vulnerabilities to China naturally formed within the structure of comparative advantage between countries, Korea's vulnerability is due to both comparative advantage and the division of labor relationship between the two countries.

[Image source=Yonhap News]

In particular, as cracks have formed in the international division of labor centered on the U.S. and China recently, the global supply chain vulnerability issue is expected to persist.

Researcher Kim expressed concern, saying, "China, which has used environmental, social, labor, and trade policies as tools for industrial development in the past, is showing signs of change. Just as the urea solution crisis was a side effect of the power shortage after China declared carbon neutrality, changes in China's role could increase the supply chain vulnerability of our economy, which depends heavily on China."

Therefore, it has been pointed out that the impact on industries producing vulnerable items and related industries should be measured. He also emphasized the need to establish channels for continuous monitoring of supply chain vulnerabilities through cooperation between the private and public sectors.

Researcher Kim suggested, "Identifying vulnerable items and ripple paths using accessible data such as trade data-based vulnerable item analysis and industrial atlas analysis through inter-company data can be effectively used as basic information in the future," adding, "Companies participating in the global supply chain can also directly assess supply chain vulnerabilities through stress tests that evaluate resilience."

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