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South Korea Foreign Trade Policy
Seoul stated in 1987 that its foreign trade policy was
structured for further expansion, liberalization, and
diversification. Because of the paucity of natural resources and
traditionally small domestic market, South Korea has had to rely
heavily on international trade as a major source of development.
Seoul also sought to diversify trading partners to ease
dependence on a few specific markets and to remedy imbalances in
the present tendency to bilateral trade.
Exports and Imports
The rapid growth of South Korea's economy in the late 1980s
led to significant increases in exports and imports (see
table 7,
Appendix). In the wake of the 1988 Seoul Olympics, South Korea's
trade surplus exceeded US$11 billion and foreign exchange revenue
had increased sharply. Seoul's trade with communist countries
surged in 1988. Trade with Eastern Europe was US$215 million,
trade with China almost US$1.8 billion, and trade with the Soviet
Union US$204 million.
In 1989 total exports grew to US$74.29 billion, and imports
totaled US$67.21 billion. South Korea's annual trade exceeded
US$100 billion for the first time in 1988, making it the world's
tenth largest trading nation.
During the 1960s and early 1970s, the commodity structure of
Seoul's principal exports changed from the production of primary
goods to the production of light industrial goods. After 1974
there was a rapid expansion in the production and export of heavy
industrial and chemical products. By 1986 the share of heavy
industrial and chemical products in total exports had expanded to
55.5 percent (as compared to 18.9 percent in 1980) whereas the
share of light industrial products had shrunk to 40.9 percent (as
compared to 71.1 percent in 1980).
South Korea had depended greatly on the United States and
Japan as its major trading partners, with 75.6 percent of all
exports going to these markets in 1970. Success at diversifying
export markets led to a reduction in the United States-Japan
export market share to 55.6 percent in 1986. The Middle East
accounted for 12 percent of South Korea's export trade from 1972
to 1977, but its share declined to 5.2 percent in 1986 because of
the collapse of the construction boom in the Middle East and the
Iran-Iraq war (1980-88). Exports to Western Europe declined from
18.8 percent in 1979 to 15 percent in 1986. Exports to developing
areas, such as Latin America (0.8 percent in 1972; 3.6 percent in
1986) and Oceania (0.9 percent in 1972; 1.4 percent in 1986),
grew.
Indirect Seoul-Moscow trade was estimated at about US$20
million in 1978, with Moscow importing electronics, textiles, and
machinery and exporting coal and timber. By the late 1980s, South
Korea's global fur trader, Jindo, was expected to produce US$20
million worth of fur garments annually in a joint venture with
the Soviet Ministry of Light Industry. South Korean
businesspeople were offered such Soviet products as instruments
for nuclear engineering and technology for processing mineral
ores and concentrates. In the first ten months of 1989, bilateral
trade between Seoul and Moscow reportedly increased 156 percent
from 1988 figures to US$432 million.
Since the early 1960s, the structural pattern of imports had
shown changes, particularly in the relatively decreasing share of
imported consumer goods and the accelerated growth of industrial
supplies and capital equipment imports. The share of consumer
goods imported in 1962 was 24.1 percent of total imports; this
share declined to 9.8 percent of total imports in 1986 because of
increased South Korean production of these goods for the domestic
market. The declining share of raw materials as a percentage of
imports during the early 1970s was reversed in 1974 because of
the increased value of oil imports (caused by the 1973 war in the
Middle East). By 1979 crude oil was 25 percent of South Korea's
total import requirements. This figure dropped to 8.4 percent in
1988 because of the use of other sources of energy and the
decline in the price of petroleum in the late 1980s.
South Korean exports to the United States in 1988 rose to
US$21.5 billion, a 17-percent increase over 1987; imports rose to
US$12.8 billion, a 46-percent increase over the 1987 level. The
percentage of total South Korean exports destined for the United
States market decreased to 35.3 percent in 1988 from 38.7 percent
in 1987. At the same time, the United States' share of total
South Korean imports rose to 24.6 percent, up from 21.4 percent
in 1987. By 1988 Seoul's favorable balance had grown to more than
US$8.7 billion.
In 1989 imports rose to US$57 billion (up 18 percent from
1988) whereas exports reached US$61 billion, a 2-percent increase
from 1988. The trade surplus was reduced from US$11.5 billion to
US$4.3 billion and was projected to decline even more. Invisible
receipts rose 10 percent, but payments, mainly reflecting a big
increase in South Korean travel abroad, were up 20 percent. Thus,
the surplus on invisible trade was reduced from US$1.3 billion to
US$400 million.
Data as of June 1990
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