Since the 2000s, South Korea has experienced significant changes in its industrial and employment structures as a result of trade shocks, including the expansion of Free Trade Agreement (FTA) policies and the restructuring of trade structures centered on China and Vietnam. Although these changes have contributed to South Korea’s relatively high economic growth rates, they have also widened the income and employment stability gap between workers (Koo and Kim 2020; Koo et al. 2021). 

In light of the profound impact of trade shocks on the economy, effective protection and support for firms and workers who have suffered relative losses in the adjustment process is considered an essential measure to maximize the net benefit of trade. Such a measure represents a crucial policy goal that requires prioritization in South Korea, given the country’s heavy reliance on international trade. To achieve this policy goal, South Korea has primarily implemented the Act on Trade Adjustment Assistance and the Employment Insurance Act as domestic supplementary measures. However, despite the significance of the policy objectives pursued by these two acts, the analysis of their trade adjustment support performance remains inadequate. 

Therefore, this study aims to investigate the effects of existing domestic supplementary measures, such as the trade adjustment assistance programs and the employment insurance programs, for domestic firms and workers affected by trade shocks. In addition, we also examine similar programs in the United States and European Union as benchmarks. Based on the results of the regression analyses and case studies, we discuss how to improve the Korean domestic supplementary measures for trade adjustment.

The second chapter provides an overview of Korea’s trade adjustment assistance programs and the employment insurance system, which can be considered the two pillars of Korea’s trade damage countermeasures. In the third chapter, we analyze the support performance of the trade adjustment assistance program for trade-impacted firms and the employment insurance programs for trade-impacted workers using micro data. The fourth chapter examines the main contents, recent trends, and implications of the United States’ Trade Adjustment Assistance (TAA) and the European Globalization Fund (EGF), which are prominent examples of trade shock protection systems overseas. Finally, in the fifth chapter, we suggest policy improvement plans based on the findings of the empirical analyses and case studies.