1

UK-KOREA TRADE: Maximising the Relationship

1. Goods and Services Trade: A Strong and Diverse Relationship

The bilateral trade relationship between the UK and Korea is strong. Korea is the UK’s 4th largest trading partner1 in Asia, excluding transport hubs Hong Kong and Singapore in 2012 (23rd among all countries – 16th in goods, 28th in service). Chart1: UK’s top 10 trade partners in Asia (2012, £ million)

Source: ONS

The UK is Korea’s 2nd largest trading partner among EU countries and 9th largest

trading partner among all countries in 2012 excluding transport hubs (HK, Singapore)

and oil export countries (Saudi, UAE and Russia). The UK’s trade position is much better

placed than other major EU competitors such as France (20th), Netherland (19th), and

Italy (21st) although our performance lags quite significantly behind Germany (7th).

Chart2: Korea’s top 10 trade partners in 2012 (USD million)

Source: Bank of Korea

1 Sum of exports and imports in goods and services trades

10,125

0

10,000

20,000

30,000

40,000

50,000

1. China 2. Japan 3. Hong Kong

4. India 5. Singapore 6. Korea 7. Saudi 8. Taiwan 9. Thailand 10. Israel

22,867

0

50,000

100,000

150,000

200,000

250,000

1. China 2. US 3. Japan 4. Australia 5. Indonesia 6. Taiwan 7. Germany 8. Vietnam 9. UK 10. India

2

Korea is the 5th largest destination for UK goods and services exports in Asia

excluding transport hubs (HK and Singapore) in 2012. Korea is 19st largest destination among all countries in 2011, notching up from 24th in 2011 excluding HK and Singapore. Chart3: UK goods and services exports to Asia (2012, £ million)

Source: ONS

Chart4: UK goods and services exports to the world (2012, £ million)

Source: ONS

Total UK goods and services exports to Korea performed strongly, growing 57% to £6,367 million in 2012 - nearly on par with total exports to India. Goods exports have contributed more to an increase in total UK’s exports to Korea than service exports. Chart5: Trend of UK goods and services exports to top 5 Asia & Oceania (£ million)

Source: ONS

Korea is the 3rd largest destination for UK goods exports in Asia and Oceania excluding the transport hubs (HK and Singapore). UK goods exports to Korea increased rapidly from 2011 to 2012 (84%, y-o-y), surpassing its exports to Australia and India.

6,367

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1. China 2. Japan 3. Saudi 4. Hong Kong 5. Singapore 6. India 7. Korea 8. Thailand 9. Malaysia 10. Israel

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

China

Australia

Japan

India

Korea

3

Chart6: Trend of UK goods exports to top 5 countries in Asia & Oceania (£ million)

Source: ONS

However compared to other countries, UK service exports to Korea have increased moderately. Korea is 5th largest destination for UK service exports in Asia and Oceania, excluding HK and Singapore (26th in the world). Chart7: Trend of UK service exports to top 5 countries in Asia & Oceania (£ million)

Source: ONS

In light of above, UK goods exports largely determine the direction of total export growth to Korea. The share of goods exports increased to 77% in 2012 from 66% in 2011 mainly due to oil exports while the share of service exports decreased to 23% from 34% in the same period. Chart8: Trend of UK goods and services exports to Korea (2002-2012, £ million)

Source: ONS

0

2,000

4,000

6,000

8,000

10,000

12,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

China

Japan

Korea

Australia

India

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Australia

Japan

China

India

Korea

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

UK Services Exports to Korea

UK Goods Exports to Korea

4

Chart9: Share of UK goods and services exports to Korea (2002-2012, %)

Source: ONS

The share of UK service exports to Korea of total exports is 30% on an annual average in 2002-2012. This trend is similar to the one for China and India in the same period. Chart10: Trend of UK goods and services exports to China (2002-2012, £ million)

Source: ONS

Chart11: Trend of UK goods and services exports to India (2002-2012, £ million)

Source: ONS

74 75 61 67 65 65 69 69 67 66

77

26 25 39 33 35 35 31 31 33 34

23

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Share of Service Share of Goods

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

UK Services Exports to China

UK Goods Exports to China

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

UK Services Exports to India

UK Goods Exports to India

5

However, the share of UK’s service exports to Australia and Japan is more than 50% each on an annual average in 2002-2012. Chart12: Trend of UK goods and services exports to Australia (2002-2012, £ million)

Source: ONS

Chart13: Trend of UK goods and services exports to Japan (2002-2012, £ million)

Source: ONS

2. UK Service Exports to Korea

UK services exports grew 5% to £1,448 million in 2012. UK is the largest service exporter in Korea among EU countries and 4th largest among all countries after US, China and Japan over the past 5 years and in 2012 alone2.

2 To compare the UK service exports to Korea with competitors, we used the Bank of Korea data. As

such, the value of service exports can differ from the ONS data due to different methodology.

0

2,000

4,000

6,000

8,000

10,000

12,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

UK Services Exports to Australia

UK Goods Exports to Australia

0

2,000

4,000

6,000

8,000

10,000

12,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

UK Services Exports to Japan

UK Goods Exports to Japan

6

Chart14: Top 10 service exporters to Korea in 2012 (million USD)

Source: Bank of Korea Chart15: Trend of service exports to Korea (2008-2012, million USD)

Source: Bank of Korea

UK service exports comprise more than 1/3 of total EU service exports to Korea on an annual average in the past 5 years. The share of UK service exports of total service exports to Korea is 6% on an annual average over the same period. Chart16: Breakdown of global service exports to Korea by country

Source: Bank of Korea

Chart17: Breakdown of EU service exports to Korea by country

6,089

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

1. US 2. China 3. Japan 4. UK 5. Singapore 6. HK 7. Germany 8. UAE 9. Vietnam 10. Australia

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2008 2009 2010 2011 2012

US

China

Japan

UK

France

US 27%

China

11%

Japan 9% UK

6%

HK 5% Germnay

4%

Singapore 4%

France 2%

Others 32%

7

Source: Bank of Korea

UK’s service exports to Korea continued to increase the past 10 years, although not as fast goods exports. The UK service exports to Korea grew faster than its non-oil goods exports to Korea. UK service exports to Korea almost tripled in 2012 since 2002 (2.8x), while non-oil goods exports doubled (1.9x) in the same period. Including oil, UK’s goods exports to Korea more than tripled (3.3x). Chart18: Trend of UK goods and services exports to Korea (2002-2012, £ million)

Source: ONS

Chart19: Trend of UK service exports to Korea (2002-2012, %)

Source: ONS

UK’s top 3 service exports are professional services, transportation and financial. The share of these sectors compromise of 74% of the total UK service exports to Korea

UK 31%

Germnay 23%

France 9%

Netherland 5%

Italy 4%

Slovakia 3%

Belgium 2%

Spain 2%

Others 22%

1,464

4,919

2,894

505

1,448

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

UK Goods Exports to Korea (incl. oil)

UK Non-oil Goods Exports to Korea

UK Services Exports to Korea

-3%

92%

-15%

16% 7%

16%

-15%

21%

17%

6%

-0.4

-0.2

0

0.2

0.4

0.6

0.8

1

0

200

400

600

800

1,000

1,200

1,400

1,600

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

UK Services Exports to Korea

Growth Rate of UK Service Exports to Korea

8

1. Other business services: professional/technical services such as legal, accounting, consulting, advertising, market research, R&D, architectural, engineering, surveying and mining on-site processing

2. Transportation: sea/air transport for passenger and freight on UK exports

3. Financial services

Monetary financial institutions: commissions and fees, spread earnings

Loans & deposits: interest differential between borrowing and lending

Fund managers: commissions/fees for securities dealers and spread earnings

4. Travel: business expenditure by seasonal/border workers, personal health, education

5. Royalties and license fees: film and television, other royalties and license fees

6. Insurance: life insurance, pension funds, freight insurance, reinsurance, insurance brokers

7. Computer and information services: IT related service

8. Government: expenditure by foreign embassies and consulates

9. Construction: construction projects (if operate for over a year, the enterprise becomes part of the host economy and its transactions are excluded from the trade in services account, rather, recorded under FDI.

10. Communications: Postal and courier services, telecommunications services

on annual average in the past 5 years. The largest service export in value is professional services – see chart18 for details. But breakdowns of professional services are unknown. Chart20: Share of UK’s top 10 service exports to Korea (2008-2012, annual average)

Source: ONS

Chart21: What are services in trade?

Except for financial sector, most service exports continued to increase in the past 5 years. Chart22: Trend of UK’s top 10 service exports to Korea (2008-2012, £ million)

28%

26%

20%

12%

4%

6%

1% 2% 2%

1. Other business services - professional services

2. Transportation

3. Financial

4. Travel

5. Insurance

6. Royalties and license fees

7. Communications

8. Computer and information

9. Construction/recreational/government

9

Source: ONS

Chart23: UK’s top 10 service exports to Korea in 2012

Source: ONS

Chart24: Share of top 10 service exports of total UK service exports to Korea in 2012

Note: Figures for construction and government are combination of the two since both are unknown – subtraction of the rest sectors from the total service exports. Source: ONS

3. UK Goods Exports to Korea in 2012

UK exports to Korea made the largest contribution (15%) to growth in UK’s total exports to the world in 2012. UK goods exports to Korea increased 82% to £4,919 million in 2012 from 2011. When stripping out oil, Korea made the 8th largest global contribution (3%) to total UK export growth excluding transport hubs such as Netherlands and Singapore.

0

50

100

150

200

250

300

350

400

450

2008 2009 2010 2011 2012

1. Other business services Professional services

2. Transportation

3. Financial

4. Travel

5. Royalties/license fees

6. Insurance

1,448

11

13

20

42

79

145

194

233

337

374

0 200 400 600 800 1,000 1,200 1,400 1,600

Total services

10. Personal, cultural and recreational

9. Communications

8. Construction and Government

7. Computer and information

6. Insurance

5. Royalties and license fees

4. Travel

3. Financial

2. Transportation

1. Other business services - professional services

26%

23%

16%

13%

10%

5%

3% 1% 1% 1%

Other business services

Transportation

Financial

Travel

Royalties and license fees

Insurance

Computer and information

Communications

Personal, cultural and recreational

Others

10

Chart25: Which country contributed largest to growth of UK total exports to world in 2012?

Source: HMRC

Chart26: Contribution of UK exports to Korea (excl. oil) to growth of UK exports to world

Source: HMRC

UK exports to Korea reached a new historical peak in 2012. Korea ranked 16th largest destination for UK goods exports in the world in 2012 (15th largest excluding transport hub Hong Kong), upgrading 10 notches up from 2011. Korea is ahead of India, Australia and Canada. When stripping out oil, Korea ranked 27th in 2012. In Asia and Oceania, Korea ranked 4th (3rd largest excluding transport hub Hong Kong) upgrading 3 notches up from 7th in 2011. When stripping out oil, Korea ranked 7th in 2012. Chart27: UK’s goods exports to Korea in 1996-2012 (£)

Source: HMRC

15%

9% 9% 8% 8%

5% 4%

4% 3% 3%

0%

2%

4%

6%

8%

10%

12%

14%

16%

KOREA NETHERLANDS USA SWITZERLAND CHINA RUSSIA SINGAPORE THAILAND UAE NORWAY

11% 11% 10% 9%

6% 5%

4% 4% 3% 3% 3% 2% 2%

0%

2%

4%

6%

8%

10%

12%

0

1,000,000,000

2,000,000,000

3,000,000,000

4,000,000,000

5,000,000,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

11

Chart28: Rank - UK’s goods exports to World, by country in 2012 (million £)

Source: HMRC

Chart29: Rank - UK’s goods exports to Asia & Oceania, by country in 2012 (£)

Source: HMRC

Total UK goods exports to Korea increased 82% in 2012 from 2011 (14% in 2011). When stripping out oil, the UK exports to Korea increased 15% in 2012 (1% in 2011). Crude oil contributed to 80% of the total increase in exports (59% in 2011), comprising 44% of the total UK’s exports to Korea (11.8% in 2011).

The top 5 UK’s exports to Korea (71% of total exports) performed well in 2012. Except for crude oil, an increase in machinery3 exports was the largest in value among top 5 exports. Most UK’s medium-term (5 yrs) strong exports performed well in 2012 except for electronics.

Chart30: Top 7 UK’s goods exports by value in 2012 (£)

Source: HMRC

3 The largest exports of HS 84 were (i) automatic data-processing machines (ii) turbo-jets/propellers, gas

turbines, and (iii) taps, valves and boilers. (HS 84: machinery parts, nuclear reactor, boilers, etc.)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

0

2,000,000,000

4,000,000,000

6,000,000,000

8,000,000,000

10,000,000,000

1. China 2. Hong Kong 3. Japan 4. Korea 5. India 6. Australia 7. Singapore 8. Thailand 9. Malaysia 10. Taiwan

0

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2,500,000,000

1. Crude oil 2. Nuclear reactors, boilers, machinery parts

3. Pharmaceutical

products

4. Electrical machinery (TV/mobile

phones/recorder)

5. Vehicles 6. Optical, photographic,

medical instruments

7. Beverages

2012 2011

12

Chart31: Top 7 UK’s goods exports to Korea by value change in 2012 (£)

Source: HMRC

Chart 32: UK’s goods exports by sectors in 2012 (share of total exports)

Source: HMRC

Chart33: The UK’s medium term export performance (in order of total exports in ‘08-‘12)

Source: HMRC

0

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

1. Crude oil 2. Nuclear reactors, boilers, machinery parts

3. Inorganic chemicals

4. Articles of iron or steel

5. Pharmaceutical

products

6. Road vehicles 7. Aircraft, spacecraft, and

parts

2012 2011 Change 2012-2011

Crude oil 44%

Nuclear reactors, boilers, machinery

parts 14%

Pharmaceutical products

5%

Electrical machinery parts (TV/cell

phone/recorder) 4%

Vehicles 4%

Optical, photographic, medical instruments

3%

Beverages 3%

Others 23%

0

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2008 2009 2010 2011 2012

1. Crude oil

2. Nuclear reactors, boilers, machinery parts

3. Electrical machinery parts

4. Pharmaceutical products

5. Beverages

6. Optical, photographic, medical instruments parts

7. Road vehicles

13

Chart34: The UK’s medium term exports excluding oil

Source: HMRC Chart35: The UK’s medium term strong exports excluding oil and machinery

Source: HMRC Chart36: Assessment on UK’s medium term strong exports in 2012

Change 2012 (£) 2011 (£)

Share of total exports in ‘08-‘12

Share of total exports in ‘12

1. Crude oil 582% 2,024,383,119 296,748,980 20% 44%

2. Nuclear reactors, boilers, machinery parts 38% 649,391,516 469,713,704 17% 14%

3. Electrical machinery parts -4% 199,948,618 209,336,818 7% 4%

4. Pharmaceutical products 18% 229,757,706 194,461,459 7% 5%

5. Beverages 1% 149,259,624 148,196,208 5% 3%

6. Optical, photographic, medical instruments parts 0% 156,785,707 156,658,465 5% 3%

7. Road vehicles 13% 191,720,458 169,064,856 5% 4%

Total 67% 79%

Source: HMRC

Chart37: UK’s oil exports to Korea in 2000-2012

Source: HMRC

0

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

700,000,000

2008 2009 2010 2011 2012

2. Nuclear reactors, boilers, machinery parts

3. Electrical machinery parts

4. Pharmaceutical products

5. Beverages

6. Optical, photographic, medical instruments parts

7. Road vehicles

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

2008 2009 2010 2011 2012

3. Electrical machinery parts

4. Pharmaceutical products

5. Beverages

6. Optical, photographic, medical instruments parts

7. Road vehicles

0% 0% 0% 0% 0% 0% 0% 0%

13%

6% 0%

12%

44%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2,500,000,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Share of Total Exports (%) - Right

Crude Oil Exports (£) - Left

14

Disclaimer: This document is for distribution only as may be permitted by law. It is published

solely for information purposes. No representation or warranty, either express or implied, is

provided in relation to the accuracy, completeness or reliability of the information contained

in this document. The Information is not intended to be a complete statement. The Embassy

does not undertake to update or keep current the Information. Any opinions expressed in this

document may change without notice. All data used is publicly available via the ONS, HMRC

and Korean data sources.