[In-Depth Look] Opportunities in the New Landscape of Trade and Investment

KOTRA Kim Yuntae, Head of Small and Medium Enterprises Division

Yuntae Kim, Head of Small and Medium Enterprises Division at KOTRA

David Ricardo's 19th-century theory of comparative advantage contributed to the spread of free trade. It is the logic that both countries with high productivity and those with low productivity can benefit through free trade. Based on this theory, the world has strengthened globalization and free trade. However, globalization and multilateral trade, symbolized by the World Trade Organization (WTO), are losing their power. Hegemonic countries with absolute advantages are strengthening their trade policies, causing significant changes in the global business order. This is also why the Biden administration in the United States has consistently focused on strengthening global supply chains since its inception. Major advanced countries are reexamining vulnerable supply chains that could harm their industries from a security perspective.

Our economy, which is highly dependent on foreign trade, may be more affected by the restructuring of the global business order. In addition to supply chain issues, several complex challenges such as the transition to a low-carbon and digital economy and the acceleration of low birth rates and aging are intricately intertwined. Now, as a new order is being formed after the unprecedented turmoil of the COVID-19 pandemic, the government and companies must cooperate closely as one body to secure an advantage in the new order. There are usually more opportunities when the original order is being reshaped. What opportunities and challenges will the new order of trade and investment bring?

First is the digital transformation. Due to the COVID-19 pandemic, the proportion of exports through online channels in global trade is rapidly increasing. Last year, online export sales by Korean small and medium-sized enterprises grew by 91.7% compared to the previous year, and the number of online export companies increased by a remarkable 92.7% to 3,148. It is an era where anyone in the nation can challenge trade without constraints of time and space by utilizing various platforms. Moreover, with Korean culture and products gaining worldwide popularity, it is an optimal time to discover new markets and customers. This is why online exports are being recognized as a new growth engine for exports. KOTRA is also accelerating its digital export support services for Korean companies in line with this trend.

Second is the global value chain (GVC). 57.9% of Korean export companies also engage in imports. Disruptions in the supply chain can directly lead to the suspension of export product operations, so stable import support is essential. The government must support both directions of trade and investment in a balanced way, rather than focusing solely on export support. Trade can grow steadily only if institutional support for diversifying import sources and securing stable raw materials is provided. Additionally, logistics support is essential for companies facing export difficulties due to supply chain disruptions. Expanding overseas logistics bases in major trading partner countries to secure national logistics competitiveness would create synergy.

Third is the opportunity of eco-friendliness. For companies and countries, ESG management considering climate change and carbon neutrality has become an unavoidable task. The government should support trade and investment linked to carbon neutrality achievements such as fair transition performance and eco-friendly product production. When eco-friendly indicators become the standard, companies will voluntarily develop products considering carbon neutrality, naturally securing export competitiveness. Furthermore, carbon-neutral industries and technologies themselves are new export opportunities. If the government cooperates with developing countries in emerging untapped markets to discover ESG projects and becomes a key player in international reduction projects, it will be able to secure new markets.

In the new order of the global economy, the paradigm of trade and investment is rapidly changing. Beyond semiconductors, which have driven our economy's growth so far, strategies for expanding trade in new fields and qualitatively enhancing foreign investment are needed. It is hoped that the government and companies will actively respond to global paradigm shifts together and seize new opportunities in trade and investment.

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