Trade policy of South Korea has taken many shifts, from import substitution to globalization and there has been significant impact on the economy for the same.
Reduction in foreign aid hit import – dependent industries by cutting the supply of raw materials leading to economic downturn.
Materials which were essential for rehabilitation of country like cement and steel were produced domestically to reduce dependence on imports.
Financial incentives such as tax – free imports of raw materials encouraged the production of export goods, stimulating the growth in textile and electrical machine industries.
Korea had comparative advantage in these industries which absorbed well educated and highly motivated workers at low wages.
An important transformation occurred in Korea's trade policy in the sixth five-year plan, which witnessed the change in trend from heavy industry toward export – oriented consumer products, including electronics and high tech.
[3] In the mid-1990s Korea reduced tariff rates and import restriction on autos, high tech products and financial services.
Haitai, Korea's 24th largest business, filed for bankruptcy protection, the government had to bring Kia under public ownership in order to prevent job losses.
In order to protect the won, the Korean central bank raised the short-term interest rate to over 12 percent.
South Korea also agreed to restrain the chaebols by reducing their share of bank financing and requiring them to publish consolidated financial statements and go for annual independent external audits.
Subsequently, New Zealand, Singapore, Thailand and Japan expressed interest in embarking formal Free trade agreement negotiations with Korea.
On December 24, 1997, free floating exchange rate was adopted to support liberalization of the capital market.
Korean central bank amassed sufficient foreign exchange reserves to prepare contingencies such as external financial shocks.
After the financial crisis of 2007–2008, Korea embarked on new policy focuses on the need to address domestic shortcomings and to increase transparency, accountability, flexibility and the overall competitiveness of the economy through continuous participation in international cooperation, focusing globalization driven by the market and transformation to knowledge based economy.
It would be difficult to assess their impact on Korean economy because these agreements have entered into force recently and we have to wait for empirics for the same.