SEOUL -- The domestic services industry needs to take measures to reduce its snowballing trade deficit, the Korea Enterprises Federation (KEF) said in a report on January 29.
The KEF estimated the services sector’s cumulative trade shortfall at $252.9 billion (321.3 trillion won) between 2000 and 2021.
The figure was in contrast to an average surplus of $727.3 billion for G-7 industrialized countries. South Korea’s loss was less than Germany’s shortfall of $761.4 billion, Japan’s $695.4 billion and Canada’s $265.6 billion. Italy recorded a deficit of $119.3 billion.
However, the U.S. enjoyed a services trade surplus of $3.77 trillion. The United Kingdom and France posted $2.55 trillion and $598.2 billion, respectively.
The KEF used data released by the Organization for Economic Cooperation and Development (OECD) to compare South Korea with the G-7 economies.
South Korea’s deficit accounted for 0.71 percent of the country’s accumulated GDP, lower than Canada’s 0.85 percent and Germany’s 1.01 percent.
During the 22-year period, South Korea snatched a surplus of $1.23 trillion in the trade of goods. This means that the service trade deficit had eaten away the country’s current account surplus.
The country’s services exports represented 15.7 percent of its total exports in 2021, down from 16.1 percent in 2000. Meanwhile, imports of services remained unchanged at 17.8 percent during the cited period.
By sector, tourism posted a deficit of $186.3 billion, followed by royalties for intellectual property rights ($71.3 billion) and insurance ($6.2 billion).
“South Korea continued to suffer a services trade deficit because the industry’s international competitiveness was low. This had an adverse effect on the country’s current account surplus,” said Ha Sang-woo, a KEF director in charge of economic data research.
Ha called on the government to push for services market deregulation, help improve technological competitiveness, and promote investment in the sector. He also recommended that the authorities should lay the legal and institutional groundwork for the development of the industry.
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