South Korea should expand regional trade with China and Japan to shield the countries from an external economic shock, a government report said Thursday.

According to a report by the Ministry of Strategy and Finance, three East Asian countries need to beef up cooperation in their macroeconomic measures to tackle a global downturn with downside risks still lingering.

"In the wake of the financial crisis, we realized the need to expand the domestic market by increasing demand in the (Asian) region in order to strengthen economic fundamentals," the Ministry of Strategy and Finance said in a report.

The countries should work on to relieve trade barriers and enhance cross-the-border investment, it added.

Although there has been a slight increase in trade among the neighboring countries, the trade volume still remains far lower than shipments within major economic blocks, such the European Union.

While trade among EU members took up 68 percent of the total trade in 2007, the three East Asian countries' trade volume stood at merely 22 percent during the same year, the report said.

"An economic recovery is closely linked to an increase in regional trade, the three countries need to increase collaboration in carrying out macroeconomic measures until the private sector can recover on its own," said the report.