Ministry of Trade, Industry and Energy

Sales Trend of Major Distributors for February 2014

Non-Food Sectors ○ Electronics & Culture - Year-on-Year : -6.9 - Month-on-Month : -9.4 ○ Apparel - Year-on-Year : -21.9 - Month-on-Month : -22.5 ○ Living - Year-on-Year : -18.6 - Month-on-Month : -23.4 ○ Sports - Year-on-Year : -3.8 - Month-on-Month : -9.8 ○ General Merchandise - Year-on-Year : -18.3 - Month-on-Month : -17.5 ○ Sub Total - Year-on-Year : -15.3 - Month-on-Month : -18.3     Foods ○ Sub Total - Year-on-Year : -29.3 - Month-on-Month : -37.8 ○ Total - Year-on-Year : -23.1 - Month-on-Month : -30.0           Non-Food Sectors ○ General Merchandise - Year-on-Year : -2.5 - Month-on-Month : -6.7 ○ Ladies’ Formal Wear - Year-on-Year : 2.7 - Month-on-Month : -17.2 ○ Women’s Casual Wear - Year-on-Year : 2.5 - Month-on-Month : -10.6 ○ Men’s Wear - Year-on-Year : -4.6 - Month-on-Month : -31.5 ○ Children & Sports - Year-on-Year : 3.3 - Month-on-Month : -8.7 ○ Living - Year-on-Year : 12.7 - Month-on-Month : -4.7 ○ Global Brands - Year-on-Year : 18.1 - Month-on-Month : 2.6 ○ Sub Total - Year-on-Year : 3.9 - Month-on-Month : -10.1       ○ Foods - Year-on-Year : -29.2 - Month-on-Month : -43.9 ○ Total - Year-on-Year : -2.4 - Month-on-Month : -16.8           Revenues of convenience stores grew by 4.1% year-on-year due to increased sales of processed food such as beverages, fueled by the warmer climate than the previous year. However, revenues declined by 7.8% month-on-month due to a revenue decrease in all products, including tobacco, as the holiday season was over last month. Non-Food Sectors ○ Living - Year-on-Year : 2.0 - Month-on-Month : -8.9 - Percentage of sales(‘14.2) : 3.5 ○ General Merchandise* - Year-on-Year : -15.7 - Month-on-Month : -8.9 - Percentage of sales(‘14.2) : 4.7 ○ Tobacco, etc. - Year-on-Year : 3.0 - Month-on-Month : -7.6 - Percentage of sales(‘14.2) : 37.7 ○ Sub Total - Year-on-Year : 0.7 - Month-on-Month : -7.8 - Percentage of sales(‘14.2) : 45.9     Foods ○ Beverages and Processed Goods - Year-on-Year : 7.5 - Month-on-Month : -6.9 - Percentage of sales(‘14.2) : 47.4 ○ Instant foods (including some perishable goods) - Year-on-Year : 5.7 - Month-on-Month : -13.2 - Percentage of sales(‘14.2) : 6.7 ○ Sub Total - Year-on-Year : 7.3 - Month-on-Month : -7.7 - Percentage of sales(‘14.2) : 54.1       ○ Total - Year-on-Year : 4.1 - Month-on-Month : -7.7 - Per date2014-03-27

South Korea Achieves No. 2 Global Market Share for Semiconductors

According to the international semiconductor market research group HIS Technology (US), in 2013 South Korea reached the No. 2 position in its global share of the semiconductor market, trailing the US and surpassing Japan for the first time in history. This was attributable to the strong memory market and Korea’s strengthened competitiveness in the area of semiconductors for mobile devices. According to the final data released, South Korea’s global market share was up slightly from date2014-03-25

Gaps Remain between Korea and China on Major Issues, including Goods

The 10th round of FTA negotiations between Korea and China was held at KINTEX, Ilsan, for five days from March 17 (Mon) to 21 (Fri), 2014. Officials from the relevant Ministries participated in the negotiation, with the Korean delegation led by Woo Tae-hee, Assistant Minister for Trade & Chief Negotiator for FTAs of the Ministry of Trade, Industry and Energy, and the Chinese delegation led by Wang Shouwen, Assistant Minister of Commerce. During the 10th round of negotiations, the Parties discussed a range of issues, including Tariff Concession, Services, Investments, Regulations and Cooperation issues. Both Parties discussed tariff concessions for specific items, based on the already exchanged Offers and Requests. Both parties requested improved market access for areas of mutual interest, but could not reach agreement due to the significant differences between the two countries’ positions. The two countries will continue to negotiate on market access for goods, and seek ways to decide on the specific handling of each item currently under contention. The parties also had technical discussions based on the draft text, in areas such as Trade Remedy, Rules of Origin, Customs Procedures & Trade Facilitation, SPS and TBT. The two countries also continued their discussions on services, investments, intellectual property rights, competition, the environment, general provisions, e-commerce and economic cooperation (including agricultural and fisheries cooperation, industrial cooperation and government procurement). The parties decided to host the 11th round in China, at a time and place to be determined. date2014-03-24

Voice of Industry Leads the Way for Next Steps in Trade Policy

The Ministry of Trade, Industry and Energy (MOTIE, Minister: YOON Sang-jick) and the Korea International Trade Association (KITA, Chairman & CEO: HAN Duck-soo) held the Trade & Industry Forum* at COEX on the afternoon of Tuesday March 18. Participants in the forum, which was co-chaired by the heads MOTIE and KITA, included Korea Federation of Textile Industries Chairman Ro Hee-Chan, Korea Automobile Association President Kim YongGeun, INNO BIZ CEO SeongMyung-gi, Korean Advanced Farmers Federation CEO Kim Jun-bong, Korea Food Research Institute Chairman Park In-gu, Korea Fisheries Association Chairman Jae-Young Park, Korean Bar Association President We Chul-Whan, Korea Federation of Banks Chairman BahkByongWon, and Korea Association for ICT Promotion Vice President Rho Young-Gyu. * Trade & Industry Forum: Led by the Minister of Trade, Industry and Energy and the CEO of KITA as co-chairmen, the forum included leaders in the industries of manufacturing, agriculture & fisheries, and services, and established 22 subcommittees to support the development of countermeasures related to negotiations, analyze the impact of negotiations on each industry, and form complementary measures in the domestic market. At the forum, the participants discussed ①the direction of Korea’s trade policies, ②overall trends and possible response options for the Trans-Pacific Partnership(TPP) and overview of the ROK-Canada FTA, and ③ways to utilize the achievements made in Korea's summit diplomacy. There was also a report on ④the outcomes of subcommittee meetings of the Trade & Industry forum Recently, Korea concluded bilateral free trade negotiations with Australia and Canada, both of which are outstanding achievements. However, there are numerous challenges left ahead, such as the Korea-China FTA, the Trans-Pacific Partnership (TPP) and the impending expiry of the special treatment for rice under the Agreement on Agriculture of the World Trade Organization. Korea plans to pursue the Korea-China FTA with highest priority with expectations to offer more opportunities to Korea's corporations. In parallel, the government will work towards mitigating the negative impacts on vulnerable industries such as agricultural and fisheries goods. When it comes to joining the TPP, there will be a thorough review of the TPP's impact on our industries based upon the results of the preliminary bilateral talks. At the forum, high-level government officials provided information on policies aimed at reducing non-tariff barriers(NTBs) along with an introduction of cases in which NTBs were reduced. There was also an emphasis on the importance of cooperation with the industry. In terms of the TPP's impact on each industry, the government and industry reached a consensus on the need to mutually strengthen dialogue and cooperation. In particular, both sides stressed the need to analyze not only the short term but also the mid-to-long-term impact of the TPP, to monitor the progress of the pact and to review and prepare for the impact of supply chain in the TPP region on corporations and industries. To help businesses enjoy the benefits of achievements made through summit diplomacy initiated by President Park Geun-hye, the government launched a special web portal. There was a demonstration of the portal during the forum, showing how businesses can find real business deals that can be made based on the agreements made between heads of States. The government unveiled plans to maximize the mid-to-long-term results of summit diplomacy by establishing systems to provide customized support to companies that can benefit from the achievemen date2014-03-20

Evaluation of the Korea-US FTA after Two Years

Korea-US trade volume rose by 4.1% ($197.4B→$205.4B) following the implementation of the KORUS FTA. In the second year of the FTA, the trade volume of products that benefited under the pact rose by 13.0% ($41.7B→$47.1B), but the trade volume of products that were excluded from the agreement was down by 8.6% ($62.6B→$57.2B). Since the FTA took effect, Korea's exports to the US have grown faster than total exports, which has meant that the agreement has served as a sustaining pillar for exporters. Exports of products included in the FTA grew for two consecutive years (1st year 1.6%→2nd year 5.4%), with continuous growth in automobile parts (11.5→8.3%) and petroleum products (36.1→5.9%*). However, the growth rate in those sectors dropped sharply due to falling export prices and the extension of overseas oil refinery facilities. Exports of excluded items decreased (-3.5%) during the first year of the FTA, but went up in the second year (5.7%). Exports of wireless communication devices plunged during the first year of the FTA (-34.1%) only to go up again during the second year (31.3%), thanks largely to a boom in the LTE market. Exports of automobiles rose (16.5→14.7%) over the two years, due to improved quality and brand awareness. Exports of Korean agricultural products and food grew by 21.4% during the second year of the FTA, and by 9.5% during the first year. (Mar 2013~Feb 2014) It also rose in all sectors, including processed food, fruits • vegetables, livestock products, and forest products. In particular, exports of processed food (e.g., tobacc date2014-03-18

Korea, China Hold 10th Round of FTA Negotiations

The two parties will continue talks in the areas of goods, services, investment, regulations, and fields for cooperation. Items on the agenda for each sector include: - Goods: Hold concession negotiation for each product category along with drafting consolidated text in the areas of goods, product origin, customs procedure, sanitary and phytosanitary (SPS), technical barriers to trade (TBT), and trade remedies - Services & investment: Discuss methodologies of liberalization and agreed documentation in service & investment - Regulations & cooperation: Discuss agreed documentation in the areas of intellectual property rights, competition, E-commerce, transparency, environmental & economic cooperation date2014-03-17

Northeast Asian Oil Hub Development Plan

As oil trade should be activated first, after which traders should be attracted and the financial infrastructure expanded to successfully develop the Oil Hub, this Plan focuses on the measures to solve the issues of and improve the current system, which has disturbed the activation of oil trade. First, oil refining facilities will be turned into bonded factories to streamline taxation and tax refund procedures, and the regulations on the processing and transportation of bonded cargo will be eased. In addition, regulations on blending or other activities will be eased so that oil products can be mixed or processed into high value-added products with additives. In addition, measures to develop the oil and logistics hub into a financial hub are also included to the plan, including improvement of the financial infrastructure and tax incentives geared toward attracting oil traders to Korea based on future activation of trade. Types of oil trade include direct trade for consumption, brokered trade through traders and the trading of derivatives through financial organizations. Direct trade refers to transactions in which a consumer directly purchases a volume of oil from a crude oil producer or an oil product manufacturer for actual consumption. A brokered trade is a transaction made through an oil trader to gain margin by taking advantage of oil price gaps, between oil types or between regions. A trade of derivatives is a transaction that does not involve logistical transactions. The oil to be supplied in the future or the right (option) to purchase or sell oil under a specific condition are traded. The period and the background of development varies, but the US Gulf Coast, ARA in Europe and Singapore are recognized as three major oil hubs. The US Gulf Coast and ARA, Europe, have been naturally developed over the long term, with large-sized oil production sites and storage facilities built adjacent to locations of consumers as centers. Meanwhile, Singapore has rapidly emerged as an oil hub of Asia in a relatively short period of time, thanks to the government’s clear vision and strategic setting of targets. As Singapore has lost its power due to the rapid growth of oil trade volumes in Northeast Asia, the demand for a new oil hub in Northeast Asia has been constantly increasing. Korea is most favorably situated to be an oil hub of Northeast Asia, considering its geopolitical location, the world-class refinery plants, its deep sea and its ideal port conditions. Ulsan, as the world’s No. 4 liquid terminal following Houston (US), ARA (Europe) and Singapore, has already secured the ideal conditions to grow into an oil hub. Accordingly, Korea will activate oil trade by easing regulations, and t date2014-03-13

Korea’s trade surplus in ICT is on the rise thanks to advanced · emerging economies’ increase in ICT product exports

Korea’s ICT product exports in February 2014 were recorded as USD 12.84 billion, up by 8.4% compared to the same period in the previous year. Korea’s ICT product exports increased evenly in the advanced and emerging countries based on export restoration in the U.S., European countries and Japan, as well as export expansion to ASEAN 〮 Latin American countries. By region, ITC product exports to the U.S. increased to USD 1.12 billion, up by 7.9%, while those to EU countries, Japan, ASEAN countries, and Latin American countries were recorded as USD 1.34 billion (up 1.9%), USD 0.53 billion (up by 19.7%), USD 1.65 billion (up 5.4%), and USD 0.76 billion (up 8.3%), respectively. By item, mobile phones (USD 2.05 billion, up 37.7%), semiconductors (USD 4.47 billion, up 14.6%) and D-TVs (USD 0.53 billion, up 8.6%) all continued to lead the increase in exports. Korea's ICT industry was in the black, recording a surplus of USD 6.63 billion, which served as a driving force to reach the nation’s trade surplus of USD 0.93 billion for the month. ICT product export performance and trade balance in February in recent years are shown in the figure below. By region, imports from most countries such as China (including Hong Kong, USD 2.16 billion, up 15.6%), ASEAN countries (USD 1.01 billion, up 27.2%), the U.S. (USD 0.6 billion, up by 5.4%) and EU countries (USD 0.46, up by 9.7%) increased. As well, it is expected that ICT product exports will remain strong mainly with restoration in the world ICT markets and growth of major items such as Smartphones, and semiconductors. date2014-03-12