Publications
Policy Analyses
Author Chul Chung, Chankwon BAE, Jong Duk KIM, Minchirl CHUNG, Shi Young Lee, HAN Hongyul Series 18-31 Language Korean Date 2018.12.31
Good trade policies should be fair as well as efficient. Fairness in trade policies incentivizes people in the right direction and ultimately increases the efficiency of the economy by promoting productivity. Providing proper education regarding trade policies helps people to correctly understand the fairness of policies pursued by the government, thus eliciting support from the people. Building up social capital through inclusive trade policies that are grounded in both efficiency and fairness, together with diverse strategies to raise the public’s understanding of these inclusive policies, is the primary component of “good” trade policies contributing to our society’s integration and enhancing trust in the society.
According to our survey of the Korean people’s perception on Korea’s trade policies, people believe that the fairness of trade policies can be achieved by supporting small and medium enterprises (SMEs) at the firm level and by strengthening the social security system at the individual level. People tend to think that trade policies are unfair because these policies mostly benefit large companies. Although this kind of perception can be attributed to Korea’s past economic growth paths that had emphasized trickle-down effect, the fact that SMEs utilize FTAs to a lesser extent than large firms also reinforces this popular perception. However, it should be noted that the lower FTA utilization rate by SMEs is more attributable to structural factors such as relatively high fixed costs for SMEs utilizing FTAs rather than any intrinsic unfairness in trade policies per se. Therefore, we need to develop trade policies that one friendly to SMEs in order to improve the fairness of trade policies. Simultaneously we need to implement policies that help SMEs enlarge their capacity for utilizing FTAs and outcomes of trade policies. Further, in order to raise the level of fairness, an effective trade adjustment system should be set up for individuals who were hurt directly by trade policies.
Thus, we suggest the policy recommendations in the structure of principles, goals, and tasks for inclusive trade policies as follows: <Figure>
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