[The Editors' Verdict] The End of the Export-Led Economic Model

South Korea's full-scale export drive policy began with the announcement of the First Five-Year Economic Development Plan in 1962. According to the First Economic Development Plan documents stored at the National Archives, the plan presented specific methods such as increasing exports and improving the international balance of payments under the slogan of building a self-reliant economy. Park Chung-hee, then Chairman of the Supreme Council for National Reconstruction, stated in the preface of the document that "the first plan aims to lay the foundation for South Korea's economy to grow independently."

The government emphasized exports at the time to realize the slogan of ‘self-reliant economy.’ To achieve economic self-reliance, production infrastructure was necessary, and for that, capital had to be secured. The only way was to increase exports while restricting imports to earn foreign currency. The plan specified concrete measures to respond to domestic demand as much as possible through self-reliance by quadrupling exports during the plan period while fostering substitute industries to increase domestic production. Women's hair was made into wigs, and dried squid from the East Sea once became one of the top five export items.

Although the growth rate target was lowered due to changes such as difficulties in attracting foreign loans, exports became the main driver of South Korea's economy for over 60 years. Starting with achieving $100 million in exports in 1964, South Korea reached $1 billion in exports in 1973, and four years later, in 1977, $10 billion. Last year, South Korea's exports reached $683.8 billion, growing more than 68 times in 47 years. Imports recorded $632 billion, resulting in a trade surplus of $51.8 billion. Of course, the global free trade trend, including the establishment of the World Trade Organization (WTO) over the past 30 years, also played a role. However, it cannot be denied that the awareness of the importance of exports and foreign currency earnings significantly contributed to economic growth.

The export-led model has recently faced fierce challenges. The export-led economic growth model no longer works. With the inauguration of the Donald Trump administration in the United States, the previously ‘booming’ exports became a concern for our economy. During the four years of the Trump administration, South Korea's trade surplus with the U.S. was about $60 billion, but it increased to $150 billion during the Joe Biden administration. From President Trump's perspective, who pledged to eliminate trade imbalances, the growing trade deficit between the U.S. and South Korea became a target for adjustment. This means that even if South Korea works hard to increase exports, the structure no longer allows earning foreign currency effectively.

Choi Tae-won, Chairman of SK Group and the Korea Chamber of Commerce and Industry, also expressed concerns about the export-led economic structure. While good export performance is positive, the aftershocks that must be borne cannot be ignored. He recently appeared on a broadcast program and said, "Fundamentally, we are facing the issue of having to change the model of earning money through exports." He also mentioned that the export-led economic model used for decades is difficult to operate as it did in the past under the current trade order. Export companies are creating production bases overseas to reduce variables.

It now seems clear that it is time to reconsider how to change the economic formula. Above all, it has become important to create an economic structure less affected by external variables. The ‘self-reliant economy’ contained in the First Economic Development Plan, when there was no production infrastructure, was an ambitious goal, and South Korea has been striving toward it. Presenting a new direction for economic growth has become our greatest challenge 60 years later.

This content was produced with the assistance of AI translation services.