Import source diversification policy(ISDP) presupposes that foreign trade deficit vis-a-vis one nation is undesirable and its purpose lies in maintaining the balance of trade with each country.
The background for this policy can be found in a search for ways to cushion the impact stemming from import liberalization to protect and foment domestic industry.

In the meanwhile import source diversification policy(ISDP) has had some merits in terms of controlling the trade deficit vis-a-vis Japan and fomenting domestic capital goods industry.
But on the other hand, there has been criticism about the negative side-effects of ISDP. First of all, for the most part, no consistent principles have been established on the types of products which are to be included or excluded from the policy. Thus, some suspect whether ISDP has only succeeded in protecting industry interests while creating many inefficiencies by restricting competition. In particular, since the end of 1980s when the export competitiveness of Korean products has dropped sharply, many people question the efficiency of ISDP.

In this connection, this study proposes to set forth plans for enhancing ISDP in the future on the basis of a critique of the economic efficiency of the said policy.