Abstract
At the end of 2011, the Republic of Korea (hereinafter Korea) became the ninth country to join the “one-trillion-dollar trading club,” departing from the ranks of newly emerging countries to join the ranks of trade giants. After reaching the $100 million mark in 1964, Korea’s exports grew more than five thousand times in 47 years, making it the seventh-largest exporting country in the world. Its economic development model has been characterized as export-oriented industrialization (EOI).
This chapter is adapted from, and draws heavily on, the author’s previous publications as cited in the references section.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
The Kim-Ohira memorandum states that Japan would pay $300 million in grants over the following 10 years; it would loan a further $200 million—also over a period of 10 years—from its Overseas Economic Cooperation Fund, with a repayment schedule of 20 years at 3.5 % interest, deferred for 7 years; and that it would arrange for private loans of over $100 million through its Export–Import Bank (Lee 1995a, b, pp. 124–125).
- 2.
In the early 1960s, the Chinese communist threat loomed large. Beijing’s geopolitical divorce from Moscow, its signing of a mutual defense treaty with North Korea (1961), and its support for Southeast Asian communist movements strongly indicated to US policymakers that an Asian communist front was being consolidated. China’s successful nuclear tests—in October 1964 and May 1965—coincided with its aggressive rhetoric on Taiwan, further exacerbating threat perceptions in the rest of the region. The security outlook in Southeast Asia appeared even less promising. In April 1965, US commitment to a deteriorating situation in Indochina became much more complicated with the decision to send American troops to the conflict (Cha 1996, pp. 131–142).
- 3.
In Japan, political elites were aware of their strengths concerning Korea’s desperate economic needs. Prime Minister Eisaku Sato and the elder Liberal Democratic Party politicians, particularly former Prime Minister Nobusuke Kishi, decided to take full advantage of a strong but relatively pro-Japan Korean dictator to accelerate the negotiation process (Lee 1990, pp. 169–170). Voices within the Korean Ministry of Foreign Affairs (MOFA) also pressed strongly for a settlement. As a 1965 MOFA white paper noted, the reestablishment of ties with Korea was a “historical inevitability” and Park’s urgent need for foreign capital and political legitimacy offered relatively low cost for a normalization agreement with Korea. The Sato government faced additional pressure from the powerful Japanese business lobby. Korea was becoming an increasingly important export market for Japan. Park’s second 5-year plan (1967–1971) would offer Japanese firms a plethora of large-scale projects, all of which could be underwritten by the financial package to be followed by a normalization settlement (Bridges 1993, pp. 32–33; Cha 1996, pp. 129–130).
- 4.
In his analysis of the regime shift in Japan, T. J. Pempel demonstrated that public policies of “embedded mercantilism” were pursued in the 1960s to promote macroeconomic success—budgets were typically balanced, inflation was held low, and any corporatist bargaining took place at the corporate, not the national, level. From this perspective, the political tensions that had divided postwar Japan were substantially reduced, not through Keynesianism, inflation, or corporatism, but through rapid growth that relied on domestic protection, industrial policy, and export promotion. The resultant conservative regime that emerged in Japan in the 1960s looked distinctly different from those of other advanced industrialized democracies (Pempel 1998, pp. 5–10).
- 5.
East Asia scholars tend to use the term “embeddedness” in a proactive manner. They argue that, when combined with the autonomous developmental states, embeddedness allows states to go beyond being welfare states, as defined by the traditional “embedded liberalism” literature. In this respect, “developmental mercantilism” is closely associated with “embedded mercantilism.” For more discussions about Korea’s developmental state, see Amsden (1989) and Woo-Cumings (1999).
- 6.
For more details about the evolution of Korea’s welfare state, see the chapter by Kwon in this volume.
- 7.
Under the UR agreement, Korea received a 10-year exception to tariffication of rice imports in return for establishing a minimum market access (MMA) quota. Under this quota, Korea’s rice imports grew over 10 years from 0 to 4 % of domestic consumption during the base period. The Korean government, through state trading enterprises, exercised full control over the purchase, distribution, and end use of imported rice. The original MMA arrangement expired at the end of 2004, but Korea successfully negotiated a 10-year extension. It also established tariff-rate quotas that were intended to provide minimum access to previously closed markets or to maintain pre-UR access (Office of the United States Trade Representative 2006).
- 8.
Kim (2011) argues that Korea has pursued a “bandwagoning” strategy, “putting too much emphasis on accepting and adapting to neoliberal globalization,” and that it now “needs to pursue a more flexible national strategy to deal with multiple types of globalization.”
- 9.
According to Fred Bergsten (2000, p. 22), “most East Asians feel that they were both let down and put upon by the West in the crisis.” They believe that the West, in particular the US, “let down” Asia because Western financial institutions and other actors caused or exacerbated the crisis by withdrawing their money from the region and then refused, as did the US, to take part in rescue operations to manage it. They believe that East Asia has been “put upon” by the West because of the way in which, through the IMF, the West dictated the international response to the crisis and because of the perceived consequences of the IMF’s prescriptions. See also Pempel (1999) and Wade (2000).
- 10.
The share of agriculture, forestry, and fisheries in Korea’s total employment decreased continuously from 17.9 % in 1990 to 8.1 % in 2004. The share of the three sectors in Korea’s GDP was less than 4 % in 2003 (Ministry of Finance and Economy 2005).
- 11.
Under a 1977 government directive to diversify imports, 50 products from Southeast Asian countries were subjected to import approval. Japan was not specifically designated, but was the implied target. In 1980, the list was expanded, and formal restrictions were applied to the country—that is, Japan—which had been the largest exporter to Korea in the previous year. When, in 1982, Saudi Arabia became the largest source of imports, this qualification was changed to include the largest source of imports over the previous 5 years. The list has fluctuated in length, from 162 Japanese products subject to this system in July 1982, to a peak of 344 items in April 1988, before falling to 258 in 1991. This list was regularly amended.
- 12.
In a speech to the Korean Chamber of Commerce and Industry on March 28, 2006, President Roh asserted: “China is surging. Japan is reviving. Trapped between China and Japan, Korea desperately needs to develop a strategy to cope with current challenges. One of the most effective ways to accomplish this goal is to improve our country’s competitive edge against China and Japan in the US market by concluding a KORUS FTA” (quoted in Koo 2009b, p. 190).
- 13.
Interview with Minister Kim Hyun-chong, May 2009 (quoted in Sohn and Koo 2011, p. 443).
- 14.
Interview with Minister Kim Hyun-chong, May 2009 (quoted in Sohn and Koo 2011, p. 450).
- 15.
On February 5, 2008, in a forum arranged on the fifth anniversary of his inauguration, Roh argued: “Some label me as leftist, others liberal. What is important is adopting necessary policies for our economy. In that sense, my government could be called leftist liberals” (quoted in Sohn and Koo 2011, p. 450).
- 16.
The concept of “flying geese” was first used by the Japanese economist Kaname Akamatsu (1937). Akamatsu found that the process of industrialization in the Japanese empire in the 1920s–1930s followed three stages: import of new products, import substitution, and export. This process appeared as an inverse “V” shape, resembling the flight pattern of wild geese migrating between Japan and Siberia. Akamatsu’s product cycle theory was used to justify the hierarchically organized division of labor in the Greater East Asia Co-Prosperity Sphere. Subsequent adherents of the flying geese model—Korea and Taiwan in the 1960s, and later developers Thailand, Malaysia, and Indonesia in the 1990s—grew rapidly as a result of technology and process transfer through the investment and outsourcing of Japanese companies, as these companies followed low-cost production in the later stages of product cycles (Yamazawa 1990).
- 17.
As a result of the 1998 government organization reforms, which were intended to consolidate institutional support for President Kim’s reform agenda, the OMT was formed under the Ministry of Foreign Affairs and Trade (Koo 2006, p. 148). However, the OMT was abolished and its trade negotiating power has been delegated to the Ministry of Industry, Trade and Energy as a result of the 2013 government organization reforms.
- 18.
The OMT’s neoliberal policy orientation was further highlighted by the appointment of its third trade minister, Kim Hyun-chong, in July 2004, as well as the promotion of its first trade minister, Han Duk-soo (1998–2004), to the post of deputy prime minister and minister of finance and economy. For the critics of neoliberal economic policy as well as hard core Korean nationalists, Trade Minister Kim was a bad choice, not only because he advocated neoliberal economic policies, but also because he grew up in the US and was trained there as a lawyer, which—the critics argued—undermined his nationalist credentials (Koo 2009b, p. 189).
- 19.
In many respects, the institutional design and operation of the OMT on trade issues resembled the Economic Planning Board (EPB) in broader economic policy areas during 1960s–1980s. For more details about the way in which the EPB managed and coordinated Korea’s economic policy, see Choi’s chapter in this volume.
- 20.
For instance, Lim (2010) found that the relationship among politicians, bureaucrats, and interest groups have been altered, so that the relative power of interest groups has been strengthened vis-à-vis politicians and bureaucrats in the fields of manufacturing, information technology, and finance.
- 21.
- 22.
To boost investment in agriculture, the Roh government promised to encourage the creation of private agricultural investment funds, with agriculture-related companies being allowed to bring in chief executive officers from outside the industry. The government would offer low-interest loans to businesses that lost more than 25 % of their sales due to the KORUS FTA by making them eligible for subsidies of up to 75 % of their payroll for one year if they switched to another industry or relocated their employees. The government also pledged to provide cash incentives of up to $600 a month to companies that hired farmers and fishermen who had been dislocated from their work (Chosun Ilbo 2007).
- 23.
At the ceremony concluding the Korea-EU FTA negotiations on July 13, 2009, President Lee expressed his hope and belief that Korea’s lagging service industry would benefit from freer trade with the EU as a powerhouse of the global service industry, accounting for 46.5 % of global trade in services (Chosun Ilbo 2009).
References
Amsden, A. H. (1989). Asia’s next giant: Korea and late industrialization. New York, NY: Oxford University Press.
Bergsten, F. (2000, July 13). Towards a tripartite world, The Economist, pp. 20–22.
Bridges, B. (1993). Japan and Korea in the 1990s: From antagonism to adjustment. Bookfield, VT: Edward Elgar Publishing.
Cha, V. D. (1996). Bridging the gap: The strategic context of the 1965 Korea-Japan normalization treaty. Korean Studies, 20, 123–160.
Chang, K.-S. (2007). The end of developmental citizenship? Restructuring and social displacement in post-crisis Korea. Economic and Political Weekly, 42(50), 67–72.
Cheong, I. (1999). Economic impact of a Korea-Chile FTA and Its implications to Korean economy. KIEP (in Korean): Seoul.
Chosun Ilbo (2006a, January 26). Screen quota cut clears way for Trade deal with US. http://english.chosun.com/site/data/html_dir/2006/01/26/2006012661013.html.
Chosun Ilbo (2006b, January 27).Will the post-screen quota measures be effective? http://news.chosun.com/site/data/html_dir/2006/01/27/2006012770343.html.
Chosun Ilbo (2007, June 29). Government to pay farmers, fishermen for FTA losses. http://english.chosun.com/site/data/html_dir/2007/06/29/2007062961022.html.
Chosun Ilbo (2009, July 14). FTA a chance to Bolster Korea’s lagging service Industry. http://english.chosun.com/site/data/html_dir/2009/07/14/2009071400678.html.
Dieter, H. (2009). Changing patterns of regional governance: From security to political economy? The Pacific Review, 22(1), 73–90.
Hundt, D. (2008). Korea: Squandering a mandate for change? Australian Journal of International Affairs, 62(4), 497–512.
International Monetary Fund, Direction of Trade Statistics Yearbook (CD-ROM). Washington, D.C.: International Monetary Fund.
Jurenas, R. & Mark E. M. (2010, September 23). US-Korea beef dispute: Issues and status. Washington, DC: Congressional Research Service RL34528, Report for Members and Committees of Congress. http://assets.opencrs.com/rpts/RL34528_20100923.pdf.
Kim, S. (2011). Globalization and national responses: The case of Korea. International Review of Public Administration, 16(2), 165–179.
Koo, M. G. (2006) From multilateralism to bilateralism? A shift in Korea’s trade strategy. In V. K. Aggarwal & S. Urata (Eds.), Bilateral trade agreements in the Asia-Pacific: origins, evolution, and implications. New York, NY: Routledge, pp. 140–59.
Koo, M. G. (2009a). Island disputes and maritime regime building in East Asia: between a rock and a hard place. New York, NY: Springer.
Koo, M. G. (2009b). Korea’s FTAs: Moving from an emulative to a competitive strategy. In M. Solis, B. Stallings, & S. N. Katada (Eds.), Competitive regionalism: FTA diffusion in the pacific rim (pp. 181–197). Palgrave Macmillan: New York, NY.
Koo, M. G. (2010). Embracing free trade agreements Korean style: From developmental mercantilism to developmental liberalism. The Korean Journal of Policy Studies, 25(3), 101–123.
Kwon, H. (2005). Transforming the developmental welfare state in East Asia. Development and Change, 36(3), 477–497.
Lee, J.-H. (1990). Korean-Japanese relations: The past present and future. Korea Observer, 21(2), 159–178.
Lee, D. (1995a). A true record of Park Chung-Hee and Korea-Japan treaty negotiations: from 5–16 to its conclusion (in Korean). Seoul: Hansong.
Lee, W. D. (1995b). The process of the Korea-Japan treaty. In The institute of national issues (Ed.), The Korea-Japan treaty revisited (In Korean). Seoul: Asia Publications.
Lee, S. (2006, April) The political economy of the Korea-US FTA: The Korean government’s FTA strategy revisited (in Korean). Paper presented at the convention of the Association of Korean Political and Diplomatic History.
Lee, S. –J., Han, T. (2006). The demise of “Korea, Inc.”: Paradigm shift in Korea’s developmental state, Journal of Contemporary Asia, 36(3), pp. 305–24.
Lee, S.-J., & Hewison, K. (2010). Introduction: Korea and the antinomies of neo-liberal globalization. Journal of Contemporary Asia, 40(2), 181–187.
Lim, H. (2010). The transformation of the developmental state and economic reform in Korea. Journal of Contemporary Asia, 40(2), 188–210.
Ministry of Finance and Economy (2005, November 22). Economic Bulletin, 27(11), Seoul: Ministry of Finance and Economy.
Ministry of Foreign Affairs and Trade. (2004). Rules regarding the special law to support farmers and fishermen as a result of FTAs. Seoul: Ministry of Foreign Affairs and Trade. http://www.fta.go.kr/pds/data/200407224131655자유무역협정체결에따른농어업인등의지원에관한특별법시행규칙.pdf
Ministry of Foreign Affairs and Trade. (2006). Key initiatives of year 2006. Seoul: Ministry of Foreign Affairs and Trade.
National Emergency Conference. (2007, March). Appeal to the Korean people. Seoul: National Emergency Conference to Urge to Stop the Rushed Korea-US FTA Negotiation. http://www.demos.or.kr/bbs/view.php?id=english&page=1&sn1=&divpage=1&sn=off&ss=on&sc=on&select_arrange=headnum&desc=asc&no=74
Office of the United States Trade Representative. (2006). The 2006 national trade estimate report on foreign trade barriers. Washington, DC: Office of the United States Trade Representative.
Pempel, T. J. (1998). Regime shift: Comparative dynamics of the Japanese political economy. Ithaca, NY: Cornell University Press.
Pempel, T. J. (1999). Regional ups, regional downs. In T. J. Pempel (Ed.), The politics of the Asian economic crisis (pp. 62–78). Ithaca, NY: Cornell University Press.
Sohn, C.–H. (2001, June 12–13). Korea’s FTA developments: Experiences and perspectives with Chile, Japan, and the US. Paper presented at a conference of the Pacific Economic Cooperation Council Trade Policy Forum on Regional Trading Arrangements: Stocktake and Next Steps, Bangkok.
Sohn, Y., & Koo, M. G. (2011). Securitizing trade: The case of the Korea-US free trade agreement. International Relations of the Asia-Pacific, 11(3), 433–460.
Wade, R. (2000). Wheels within wheels: Rethinking the Asian crisis and the Asian model. Annual Review of Political Science, 3, 85–115.
Woo, M. J. (2007). East Asia after the financial crisis. In The Korea Herald (ed.), Insight into Korea: Understanding challenges of the 21st century. Seoul: Herald Media.
Woo-Cumings, M. (1999). Introduction: Chalmers Johnson and the politics of nationalism and development. In M. Woo Cumings (Ed.), The developmental state. Ithaca: Cornell University Press.
World Bank, World Development Indicators, Washington, D.C.: The World Bank. http://data.worldbank.org/data-catalog/world-development-indicators.
Yamazawa, I. (1990). Economic development and international trade: The Japanese model. Honolulu, HI: University of Hawaii Press.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2014 Springer International Publishing Switzerland
About this chapter
Cite this chapter
Koo, M.G. (2014). Trade Policy for Development: Paradigm Shift from Mercantilism to Liberalism. In: Kwon, Hj., Koo, M. (eds) The Korean Government and Public Policies in a Development Nexus, Volume 1. The Political Economy of the Asia Pacific, vol 13. Springer, Cham. https://doi.org/10.1007/978-3-319-01098-4_6
Download citation
DOI: https://doi.org/10.1007/978-3-319-01098-4_6
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-01097-7
Online ISBN: 978-3-319-01098-4
eBook Packages: Humanities, Social Sciences and LawPolitical Science and International Studies (R0)