Bank of Korea 2020 Intellectual Property Trade Balance
[Asia Economy Reporter Kim Eunbyeol] With the rising popularity of K-pop, including BTS, and Korean dramas, the cultural and artistic copyright trade balance recorded a surplus for the first time ever last year. However, due to the spread of COVID-19, the overall intellectual property trade deficit widened significantly. Increased payments were made for using overseas media platforms such as Netflix and YouTube, and the scale of exports to overseas local subsidiaries decreased as domestic companies' overseas production was impacted.
According to the "2020 Intellectual Property Trade Balance (Provisional)" released by the Bank of Korea on the 23rd, the cultural and artistic copyright trade balance posted a surplus of $16 million last year, marking the first annual surplus in history.
This was largely influenced by a $19 million surplus in music and video trade. Park Changhyun, head of the Bank of Korea's international balance of payments team, explained, "With the continued Hallyu wave, exports of K-pop including BTS expanded, domestic drama producers increased exports, and exports of content such as webtoons also grew." While domestic content exports increased, the decline in movie theater attendance due to COVID-19 led to reduced imports from foreign film companies, which also had a positive effect.
However, as people spent more time indoors due to COVID-19, spending on overseas platform services like YouTube and Netflix also rose significantly. By institution type, foreign-invested small and medium-sized enterprises recorded an intellectual property trade deficit of $5.12 billion. This was due to a sharp increase in payments for copyrights as YouTube and Netflix viewership surged and the use of overseas smartphone applications increased amid the pandemic.
The surplus in research and development and software copyrights decreased to $1.73 billion last year from $2.96 billion the previous year. This was because imports of computer programs by foreign-invested and domestic small and medium-sized enterprises increased, turning the computer program trade balance into a deficit (-$300 million).
Patents and utility model rights posted a deficit of $2.38 billion, widening from a deficit of $1.8 billion the previous year. This was due to a decrease in exports of patents and utility model rights by domestic large corporations. Park said, "Looking at South Korea's intellectual property trade structure, it imports intellectual property rights from countries like the U.S. and exports them to overseas local subsidiaries. However, due to COVID-19, demand contracted and production was globally impacted, significantly reducing the surplus with Vietnam. We believe this is due to the sharp decline in IT products such as smartphones produced by domestic large corporations in Vietnam."
Trademark and franchise rights also recorded the largest annual deficit ever at -$1.15 billion. The second largest deficit was in 2019 at -$1.07 billion.
By industry, both manufacturing (-$570 million) and services (-$1.32 billion) recorded deficits. Chemical products and pharmaceuticals (-$450 million) and electrical and electronic products (-$130 million) showed deficits, while automobiles and trailers posted a surplus of $790 million.
In the service sector, wholesale and retail trade (-$530 million) and information and communications (-$410 million) recorded deficits, turning from a surplus of $70 million the previous year to a deficit.
By trading partner country, the largest deficits were with the U.S. (-$3.84 billion), the U.K. (-$980 million), and Japan (-$350 million). Conversely, surpluses were recorded with China ($2.59 billion) and Vietnam ($1.77 billion).
Park explained, "The large surplus with China is mainly due to increased exports of computer programs such as games, and Vietnam had a high proportion of exports in patents and utility model rights."
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