Changing Focus
The Korea Institute for Industrial Economics & Trade (KIET), a government-run research institute under the Korean Prime Minister’s Office, has concluded that export-led growth is virtually over in the Korean economy.
Korea posted an export growth rate of 2.8 percent over the past decade (2013-2022) and it was lower than the growth rate of world trade (3.1 percent) according to the institute’s report titled “The End of the Second Globalization and the Korean Economy.” From 1990 to 2007, before the global financial crisis, Korea’s export growth rate sat at 12.9 percent, significantly eclipsing world trade’s growth during the same period.
The KIET introduced globalization as “a phenomenon in which ratios of world trade and gross domestic product (GDP) trend upward.” The first wave of globalization occurred between the late 19th century and World War I with the rapid development of transportation and communications. The second globalization began after the end of World War II with the emergence of the General Agreement on Tariffs and Trade (GATT). “The second globalization appears to have effectively ended after the 2008 global financial crisis,” the institute concluded.
This analysis was made based on a decline in the growth rate of global trade. According to the International Monetary Fund (IMF), the average annual real world trade growth rate over the past decade has been 3.1 percent, which is less than half of seven percent in the pre-crisis period of 1990-2007. A U.S.-China conflict, which is said to be the cause of the decline in global trade growth, has intensified, and the United States, which has gained economic hegemony through globalization, has proposed the New Washington Consensus with alliance and cooperation at the center. “The New Washington Consensus is a declaration of the end of the second globalization from a U.S. perspective,” the KIET said.
South Korea, with an economy that has grown through exports, is feeling this change more directly and significantly. South Korea’s export growth rate reached 12.9 percent during the 1990-2007 period, but during the decade from 2013 it was only 2.8 percent.
“If a country’s export growth rate falls short of its economic growth rate, it cannot be called export-led growth,” the KIET said. “We can say that the end of the second globalization has put an end to the export-led growth of the Korean economy.”