Since the end of the Second World War, eight multilateral bargains under the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO), coupled with the fall of the Soviet Union, have delivered considerable trade liberalization around the globe. In addition, many nations including South Korea have slashed their barriers and opened their markets unilaterally or through preferential trade agreements. Widespread opening has contributed to the best half century of world economic growth since the time of Jesus Christ (Maddison 2003, table 8b).
Dramatic improvements in communications and transportation technology have of course made a major contribution as well. While it is difficult to disentangle the effects of policy from the effects of technology, credible estimates give approximately equal weight to these two forces of world economic integration (Yi 2003).
This article summarizes the economic payoff to South Korea from its postwar trade opening (reflecting the combined force of policy and technology) and estimates the potential future gains from more policy opening going forward. To quantify these gains, we survey different methodologies as well as educated guesses available in the literature. Despite their differences, the methods cited may bracket a range that is quite likely to contain the true value of gains. Taken together they suggest that South Korea has enjoyed very substantial past gains and may reap large future payoffs from expanded commercial ties with the global economy.
We calculate that trade opening since World War II has added between $90 billion and $100 billion to the South Korean economy, around $2,000 per capita additional income. Our speculative estimates of potential additional gains from removing the rest of trade and investment barriers between South Korea and its economic partners range from $57 billion to $76 billion, around $1,200 to $1,600 per capita. Because trade opening permanently raises national income, these gains are enjoyed annually.