Expanding Korea’s investment in the U.S., win-win effect for the Korean-U.S. economies
Analysis has shown that Korea’s increased investment in the United States will have a positive effect on both countries’ economies.
According to the report ‘Status of Korean Companies’ Investment in the U.S. and Economic Creation Effect’ published by the Korea International Trade Association (KITA, Chairman Jinsik Yoon) International Trade Research Institute on the 20th (Monday), as of 2021, the U.S. economy compared to the size of assets of Korean companies in the U.S. The contribution to growth (GDP) was $10.1 per $100, significantly exceeding the average of all foreign companies ($6.8 contribution per $100). The United States’ contribution to overseas exports was $43.0 per $1,000 of asset size, far exceeding the average ($24.3 per $1,000) and ranking 5th among 26 major countries.
In terms of employment scale, the number of employees at Korean companies was relatively small compared to other foreign companies, but it was analyzed that they were contributing to job creation in the United States, focusing on high value-added industries. As of 2021, the proportion of job creation by foreign companies in the United States was the United Kingdom (15.4%), Japan (12.1%), and Germany (11.6%), while the proportion of Korean companies was only 1.1% * . However, the average annual salary per worker at Korean companies is $104,000, which is higher than that of major countries (the overall average is $87,000), which appears to have contributed to the creation of quality jobs, especially in high-value-added industries.
* Proportion of employees at Korean companies among the total number of employees at foreign companies in the United States
Meanwhile, the advancement of Korean companies into the United States has been shown to be positive for Korea as well. As a result of the empirical analysis, it was analyzed that if Korea’s overseas direct investment (ODI) to the United States increases by 10%, exports to the United States increase by 0.202%. This was found to be because Korean companies in the United States procure a lot of raw materials and intermediate goods from Korea. In fact, as of 2022, the proportion of purchases (procurement) from Korea out of all purchases by Korean subsidiaries in the United States reached 61.4% * . Considering that the average proportion of Korean purchases by companies operating overseas is 43.4%, the export inducement effect of entering the United States is very large compared to other countries.
* Based on data from the Export-Import Bank of Korea <Overseas Direct Investment Management Analysis for Fiscal Year 2022>
By item, the export-inducing effect of intermediate goods was evident. It was analyzed that if foreign direct investment in the US increases by 10%, exports of intermediate goods to the US increase by 0.250%, which exceeds the overall export increase effect (0.202%). This is believed to be because Korean companies mainly procure materials, machinery and equipment for new factory construction, and intermediate goods required for production domestically.
Do Won-bin, senior researcher at the Korea International Trade Association, said, “Korea’s investment in the United States is having a positive effect on both fostering high-tech industries and responding to climate change, which Biden values, and strengthening manufacturing and resolving trade imbalance, which Trump emphasizes.” “There is a need to use Korean companies’ contribution to the U.S. economy as leverage to ease U.S. trade pressure,” he emphasized.
Editor. Roy
