Value-Added Exports and the Decomposition of Exports in Korea Trade

This paper provides industry-level calculations of value-added export (VAX) ratios in gross exports and then decomposes VAX ratios and gross exports of each industry to the world, China, Japan, and the U.S. with the analysis of detailed components. According to the results, GVC participation is more active in Korea's Manufacturing sector than in its primary sector in terms of VAX ratios. In addition, decreasing trends in VAX shares in Korea's major export-oriented industries imply an increasing level of GVC activity over time until around 2009. Further, evaluated in terms of value-added exports to the world, China, the US., and Japan, there is no evidence of any erosion in the competitiveness of key export-oriented industries despite the value-added deficit in trade with Japan. This trade deficit is fully covered by the surplus in trade with other countries within the global production network, and the deficit show sharp decreases in recent years. The decomposition of VAX implies that exports of intermediate goods dominate exports of final goods, and the decomposition of gross exports into nine terms suggests that the vertical specialization involving the use of foreign intermediate goods (VS) is not dominant, which is inconsistent with general expectations. Instead, other forms of vertical specialization. (VS1) matter in key export-oriented industries.