An Analysis of Factors for Competitiveness of Materials and Components Industry in Daegu·Gyeongbuk: From the Perspectives of Reducing Trade Deficit with Japan
Authors:   Asia-Europe Perspective Association, Bae Soo-Jin 
Published: June 2018

Trade deficit with Japan since the start of industrialization in Korea have not been resolved even today are the challenges. Since 1965, Japan trade surplus with Korea never changed. As South Korea's foreign trade volume has steadily increased, trade deficit with Japan grew bigger proportionally. In 1965 was only 0.13 billion trade deficit with Japan. Korean exports to Japan in the first half of 2010 accounted for $ 12.83 billion, imports 30.9 billion dollars, which resulted in 18.07 billion deficit. This amount records the largest trade deficit since the start of trading with Japan. In 2008, for the first time, trade deficit had surpassed 30 billion U.S. dollars.
According to the Ministry of Knowledge Economy of Korea, in 2009 parts and materials are responsible for $ 20.1 billion, to 72.7% of the trade deficit. In Particular, the core materials such as the semiconductor in IT industries are the most dependent on Japan, accounting for 40% of the total trade deficit with Japan. To make things worse, parts and material dependence is increasingly deepening.
Therefore, as one of the most important and urgent task to overcome trade deficit with Japan is always launched with the new government. It needs to export more finished goods to Japan or to substitute imported goods from Japan to domestic goods to overcome trade deficit with Japan. But, so far, Korean key components and materials industry couldn't overcome the walls of high-technology.
Under such circumstances, this thesis was devoted to analysis the causes of the trade deficit with Japan and the export competitiveness of main trade items of materials and components industry in Korea, and to seek after local/state strategies and policies reducing trade deficit with Japan.
Parts and materials industry plays an important role in the development and export performance of the economy and the balanced development of the national economy. Domestic parts and materials industry seems to be in highly growing trend owing to the government's active promotion policy and major industrial development. Map of the trade surplus has expanded continuously, and the overall competitiveness index is steadily improving. Key areas, such as design, new product development, new technology application have greatly improved. Global market share gradually increased in 2002 from 9.2% to 11.2% in 2008. Parts and materials industry structure is in transition. from universal sectors to highly value-added such as IT.
But with regards to Japan still remains serious problems. Vulnerable to the core technology for the core parts and materials, industry structure dependent to Japan has been deepening. IT core material sector, such as the semiconductor is imported mostly from Japan. Main imported items include TAC film (100%), photoresist (93%), PI film (90%), photo spacers (83%).
Daegu·Gyeongbuk has a great developmental position for the mechanical parts industry. Around this area, located well-developed machinery industry, such as the electronics industry in Gumi, steel industry in Pohang, shipbuilding and machinery industries in Ulsan and Changwon, the automotive industry in Busan, Ulsan.
But most of the machine parts industries in Daegu·Gyeongbuk are small/medium enterprises, which are simple jobbing shop contractors. Highly proportioned core field such as automotive components, fabricated metals, aluminum containers, machinery, textile machinery lacks of skills and low levels of productivity and quality of machinery made it inevitable to import machinery from Japan. Thus, it has been acting as a factor of trade deficit with Japan.
Currently, the Ministry of Knowledge Economy has determined that to respond to trends in expanding market for parts and materials in the world and to get the advantageous position in Northeast Asia division of labor is urgently needed competitiveness of parts and materials industry.