This study presents improvement measures based on secured fairness and greater internal and external efficiency by reviewing the current export assistance program amid the rapidly changing trade environment.
“Industrial targeting” refers to the government’s composite measures that manage production resources to increase domestic productivity and competitiveness of a certain industry. This method utilizes means like domestic market protection, tax benefits, elimination of bans on monopolies, and financial assistance. The scope of this measure is also limited to controlling production resources, affecting only the targeted industry, and increasing domestic productivity and comparative advantages, while excluding individual companies’ investments and marketing strategies.
The practice of targeting has been frequently used by developing and developed countries. In Korea, the export assistance program has remarkably changed since the mid 1960’s as export-led growth strategies were adopted as an industrialization initiative to foster import-substitution industries in the early 1960’s. Until the early 1980’s, the export assistance program had greatly contributed to increasing the volume of exports. However, there were growing perceptions that the program is no longer desirable, given the fact that the program continuously creates a trade surplus leading to the increased issue of currency and trade friction with the U.S. In response, the government decided to separately provide assistance to SMEs and large companies, and abolish equipment financial assistance for large exporting companies. As such, the exports assistance program is gradually declining.
However, Korea is still operating its export assistance program through methods such as tax assistance, tariff assistance, export insurance, and financial assistance. This export assistance program has made substantial contribution to the growth of exports by offering preferential interest rates on loans, loan repayment guarantees, and tax benefits to exporters. However, it also creates national economic problems such as reducing tax revenues, causing inflation, and growing certain industries only, and exacerbates trade relations with other countries.
Therefore, the future export assistance program should be redesigned for fairness and equality in a way not to distort resource distribution and disrupt the market. To this end, the following is required:
• A separate management system is required for each means of assistance
• Tax exemptions or reductions, as well as the institutions of trade financing, should be eliminated in phases
• The domestic financial market should be nurtured, while the size of exports insurance should expand
산업지원규제의 국제적 논의와 우리나라의 수출지원제도(International discussions on industrial targeting regulation and Korea’s export assistance program)
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Trade|
|Holding||KIET; KDI School|