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.
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