Prompted by a rapid realignment of global supply chains, the economic map of South Korea is also shifting fast. Such changes are conspicuous in the nation's recent relations with two major trading partners - the United States and China. The central Bank of Korea (BOK) said Thursday that South Korea registered a $7.78 billion deficit in trade with China in 2022, posting a shortfall for the first time in 21 years. This was due to the hefty reliance on China for exports paired with the drastic drop in prices of semiconductors.
In contrast, the nation registered a record surplus of $67.79 billion in trade with the U.S., riding on the booming exports of cars plus the rise in dividends resulting from increased direct investment into the U.S. What is noteworthy is that such changes in the economic landscape involving the three nations are not temporary, but structural.
Against this backdrop, Vietnam has emerged as a major economic partner for Korea. It became Korea's third-largest trading partner, surpassing Japan, last year when the two countries marked the 30th anniversary of their diplomatic relationship. Seoul's surplus in trade with Hanoi stood at $34.2 billion, compared to $28 billion with the U.S. Vietnam continued to provide an increasing surplus for Korea, ranking fifth in 2012, fourth in 2013, third in 2017 and second in 2020, before finishing in first last year. This surplus continued to grow even during the past financial crisis period.
Korea has also been the largest investor in Vietnam. And the two nations have become essential and close economic partners 50 years after they locked horns during the Vietnam War.
Korea-Vietnam relations were elevated into a "comprehensive strategic cooperative partnership" last year. It is encouraging that representatives from 205 enterprises, including major conglomerates, accompanied President Yoon Suk Yeol on his visit to Vietnam during June 22-25. The two nations are poised to double their trade volume to $150 billion by 2030. This is essential for Korea, in particular, as Vietnam has emerged as the alternative for China.
Fresh from the summit with Vietnamese President Vo Van Thuong, Friday, Yoon said the two leaders agreed to strengthen cooperation in the areas of diplomacy, security, economy and industry. "Vietnam is the core cooperative nation for us in terms of Indo-Pacific strategy and Korea-ASEAN alliance," Yoon said.
As mentioned above, a "decoupling" from China in the economic sector has become unavoidable with the rearrangement of the global supply network initiated by the U.S. A cozy economic relationship with China is unlikely for some time given the newly emerging Cold War era amid the escalating hegemonic competition between the U.S. and China.
All these and other factors prompt the need for Korea to fortify relations with India, ASEAN member states and Middle Eastern countries. And Vietnam has been the central part of such cooperation. Vietnam can play a significant role in enabling Korea to boost its exports and inject fresh air into its economy.
Vietnam is replete with key minerals such as rare earth materials, while Korea is equipped with technologies in refining and adding value. So it is promising for the two nations to have agreed to strengthen cooperation in the relevant area. They also agreed to cooperate closely in efforts to reduce carbon emissions, which have emerged as a pressing global issue.
Against this backdrop, Yoon's recent visit to Vietnam is all the more meaningful. Market diversification has been the most urgent task facing the nation with its heavy dependence on exports. Based on the outcome of the recent visit, both Seoul and Hanoi should facilitate further efforts to expand bilateral exchanges and cooperation substantially in the economic and security sectors.
Source: Yonhap News Agency