a/. (1991).
27. The discount periods were 1973-75 for electricity, 1973-79 for water, 1982-86 for railways, and 1973-86 for harbour and ports.
There was also increasing pressure for liberalisation from overseas. As the Korean steel producers' aggressive export drive increased market shares in industrial countries and hence affected structural adjustment of their steel industries, particularly in the United States, there were frequent and increasing numbers of dumping and subsidy claims (Howell et al, 1988). These were followed by pressure for import liberalisation, accelerating the process of eliminating import restrictions and reducing tariff and non-tariff barriers for various iron and steel products in Korea. Moreover, the extent of the export success of the Korean steel industry has caused the world to scrutinise it closely. International consensus leading to anti-subsidisation and free and fair trade has also been an important element in inducing liberalisation in the Korean steel industry.
The extensive government assistance and high entry barriers to the Korean steel market, and the need for liberalisation of the industry as it acquired sufficient competitiveness, were not necessarily sufficient to encourage the development of the Korean steel industry. As discussed in the analytical framework of this thesis (Chapter 2), the government's pre-commitment to unconditional liberalisation is another important policy factor providing incentives in investment and growth. In order to boost efficiency and competence in protected domestic corporations and manufacturers, the government needs to affirm unconditional elimination of protection and assistance after a certain time. Otherwise, the policy of protecting the domestic industry may discourage domestic firms from investing, since, when the domestic market is cut off from competition from abroad, they generally base their structures and ways of doing business on protectionism (Itoh, 1987).
Trade liberalisation in Korea remained almost at an standstill for about 10 years until the late 1970s (Kim et al., 1991). Even though significant efforts were made to eliminate government assistance and to lift import barriers in the 1980s, it is claimed that the changes towards liberalisation in the 1980s failed to produce an end to Korea's industrial policies on steel (Howell et al., 1988). Moreover, it was frequently argued that Korea's government policy and liberalisation process continued to be formulated in an ad hoc manner, that it was neither planned nor implemented in clearly defined stages but was merely a succession of piecemeal changes (Young, 1986; Kim et al., 1991; and Bartlett, 1992). Although the government's pre-commitment to unconditional liberalisation was not well-formulated or articulated, a salient feature in the liberalisation of the steel industry was the government's adoption of an advance notice system of import liberalisation in an effort to promote trade liberalisation and elimination of assistance as a long-run policy. As the nation's steel industry as a whole achieved gradually enhanced industrial competence and international competitiveness.
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all the country's steel firms became aware that liberalisation was certain regardless of the performance of individual firms. External and internal pressures for liberalisation also contributed greatly to advancing the view that Korean protection of its steel industry would not last. As the 1980s set in, pressure began to mount from the United States and other developed countries on Korea to eliminate all its protection measures. This became a critical factor not only in promoting the liberalisation process in the Korean steel industry but also in boosting the efforts of domestic firms to strengthen competitiveness and diversify their export markets.
CONCLUDING REMARKS
The Korean government intervened in the steel industry in earnest from the late 1960s when the industry had an inefficient and non-competitive base. The role of government in the establishment of a large-scale integrated steel mill, POSCO, can be understood as an attempt to transform the industry into a modem steel-making industry by overcoming problems in capital markets, as suggested in the infant industry promotion argument. Some government measures were specific to the steel industry, but most of the significant policy effects on the steel industry were in fact the result of the overall heavy and chemical industry drive and the system of financial controls launched in the early 1970s. Most of the incentives were also applied to other designated industries/firms including steel. The government's financial policies in the 1970s, in particular, were considered to have been a principal agent in industry promotion, creating strong incentives to invest for the development of steel and other strategic industries.
Even though the government's interventionist practices provided the steel industry, especially POSCO, with various incentives for development, evaluation of the policy measures that were implemented is mixed, since policy measures always involve economic costs and benefits. The costs and benefits involved in assistance given to the steel industry are difficult to evaluate, since most policy measures for steel were in fact part of the heavy and chemical industry drive and the financial policy applied to all designated industries and fums. It is also difficult to establish whether development of the steel industry would have been promoted more efficientiy under a different policy regime. The key point is that the establishment of fully integrated steel-making capacity in Korea in the 1970s clearly accorded with underlying changes in Korea's comparative advantage.
The change in the position of the Korean steel industry over time reflects the pressures for policy change in Korea. These pressures arose from internal and external
sources. Internally, they arose from the effects of growth on the competitiveness of the steel industry. The steel industry was supported to a significant extent by government policy in previous decades. Problems in capital markets in Korea provided the rationale for government assistance. Now, however, the importance of that constraint on industrial development is much less. Also, the burdens of continuing to support the steel industry are much greater, because of the shift in the intemational competitiveness of the industry.
A second set of factors contributing to the liberalisation of steel industry policy were pressures from the rest of the world. The extent of the export success of the industry has affected the further use of policy instruments to promote its growth. The Korean steel industry is now closely scrutinised by the rest of the world.
These changes have contributed to the re-direction of government policy away from active promotion. The focus of policy towards the steel industry in future will be the accommodation of the shift to net imports. Policy design in this industry was always sensitive to economic costs and benefits involved and that sensitivity is now likely to lead to a more neutral set of policies.