By Vinuri Weerawardena
From Bong Joon-ho’s ‘Parasite’ becoming the first-ever non – English speaking film to win Best Picture at the Academy Awards in 2020 to the seven-member South Korean boyband BTS securing six No. 1 songs at the Billboard charts (in one year and two months), South Korea has displayed unprecedented success with the Hallyu Wave.
The Korean (Hallyu) Wave is a term describing the rapid diffusion and export of South Korean popular culture to the global cultural markets, encompassing a wide range of goods from digital content (video games and webtoons) to Korean popular music, TV shows, fashion, cosmetics, and food. Millions around the world are thereby responsible for purchasing consumer goods they see on screen or that their favourite stars promote. This cultural phenomenon is therefore one where foreign nationals follow and consume Korean pop culture content since the late 1990s. These unprecedented developments have urged scholars to investigate its effect on exports and international trade.
The market for cultural goods is extensively globalized. In 2021, the industry was expected to be worth approximately 2.5 trillion with an average growth rate of 4.2% per annum. Among these figures is Korean cultural content which has significantly contributed to South Korea’s economy.
The effects of this phenomenon are three-tiered: it positively affects South Korea’s image; it promotes cultural content overseas, thereby inducing tourist visits and; contributes towards the growth of South Korea’s economy due to the rise in export of consumer goods.
Studies show how consumption indicators function as an empirical assessment to promote the export of South Korea’s consumer goods. These studies show how the export of these consumer goods has increased over the years. For instance, according to the Hyundai Research Institute (2018), the success of BTS is expected to affect the average annual increase in consumer goods exports of US $ 1.117 billion, approximately 1.7% of total consumer goods exports. A study by Huh and Wu (2018) found that this, in a broad sense means that cultural goods, such as the Korean Wave contents, determine the export of consumer goods. They also found that cultural factors, which are components of the Korean Wave content, are regarded as non-economic factors affecting commercial exchanges.
Several studies have verified the ripple effect of the Korean Wave on exports. These findings include conclusions including the finding that when cultural goods exports increase, the total exports increase (Kim and Ahn, 2012) and also that the Korean wave has a positive effect on the export of consumer goods (Huh and Wu, 2017).
Interestingly, Kim and Kim et al. (2021) studied the matter further and their empirical findings led them to conclude that cultural goods that are exported overseas are likely to facilitate the fact that consumers have cultural intimacy and develop their preference to product origin. One argument supporting this conclusion is the fact that smooth cultural flows generate cultural intimacy. The other and more plausible argument is the line of thought that cultural intimacy is created by the accumulation of cultural capital which in turn is facilitated by frequent cultural exchanges between two countries. Korean popular culture is the most used mode of a cultural exchange over the past 20 years. Both these arguments support the idea that cultural intimacy through cultural goods is likely to affect the export of consumer goods which is of the same origin as cultural goods. Based on these arguments, intimacy with cultural goods is likely to affect the export of consumer goods, which is from the origin of cultural goods.
Kim and Kim et al. (2021) empirically confirmed the trade creation effect that exports of Korean Wave contents drive consumer goods exports of goods such as beauty products, cosmetics, clothes, and food. Following the analysis of panel data from 102 countries consisting of Korean cultural goods exports and consumer goods exports from 2001 to 2017, it was found that the export creation of cultural goods led to the export of consumer goods, the trade creation effect that the export of cultural goods drives the export of consumer goods was significantly found.
This confirms the trade creation effect of cultural goods and as such, it may be contended that fostering globalised culture content can be an indirect trade policy for creating trade in consumer goods. However, the number of studies that delve into the matter is few. More studies need to be conducted so that the impact of cultural goods and its impact on the export of consumer goods, using South Korea as the model so that other nations too would be able to capitalize on the benefits of implementing such policies.
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