Since the 2008 global financial crisis, the Korean economy has been suffering from declining growth on the one hand and worsening income inequality on the other. For the enhancement of Korea’s growth potential and income equality, a new paradigm must be established. This report looks into such a new vision, referred to as the Inclusive Trade Initiative for the Korean economy, and suggests policy strategies for the vision.
   Under the Inclusive Trade Initiative, the national economy pursues inclusive growth within an open economic environment by improving productivity and employment. The initiative also strives to achieve domestic inclusiveness in trading with other economies and contribute to global inclusiveness. This report presents five strategies for this vision of an inclusive trading nation: increasing the role of service industries, promoting an employment-friendly FDI environment, improving SMEs’ global competitiveness, strengthening inclusive trading infrastructure and upgrading ODA’s inclusiveness. Korea’s current status and problems are investigated together with practices at other nations to produce action programs for each strategy, as follows.
   Increasing the role of service industries. Korea’s manufacturing industries have traditionally served as the main driver for economic growth, but recently exports and employment potential in these industries appear to be decreasing. Korea’s service industries will have to make a larger contribution to growth and employment. Innovations and exports in service industries, e.g. medical service and tourism, need to be promoted.
   Promoting an employment-friendly FDI environment. FDI can complement domestic investment and create more jobs. FDIs that contribute to job-creation, technology/capital intensive investment and corporate social responsibilities should be promoted by providing support programs and incentive measures.
   Improving SMEs’ global competitiveness. SMEs play an important role in sustaining stable growth, generating employment and enhancing income equality. SMEs should be offered access to more opportunities in government procurement and support programs aimed at promoting electronic trade. At the same time, stronger trade facilitation measures with other developing countries should be established for SMEs.
   Strengthening inclusive trading infrastructure. Korea’s trade policy has been mostly focused on trade negotiations up to now, but more emphasis should be placed on inclusive trade outcomes. Korea’s trade adjustment assistance will have to increase its role in supporting workers.
   Upgrading ODA’s inclusiveness. Korea has to keep increasing the volume of its aid and the inclusiveness of its aid policies. More aid for trade (AfT) programs have to be tailored to poor and vulnerable groups in aid partner countries. Also, coherence among trade policies and aid for trade should be strengthened.