less than 0.1 in the period 1966-68 to about 0.4 in the period 1981-83. In the meantime, domestic production gradually replaced imports, and import dependence fell from 0.44 to about 0.15 during the same period. From the mid-1980s, export dependence began to drop but import dependence remained at around 0.14, implying that Korea's rolling sector in this period became oriented less towards exports and more towards domestic supply. Total trade dependence of finished steel then declined with rising self- sufficiency throughout the 1970s and the 1980s. The estimates of RCA suggest that Korea's comparative advantage in finished steel trade was strengthened throughout the 1970s and until the early 1980s but declined gradually from the mid-1980s, though it retained self-sufficiency levels as high as those achieved in the early 1980s
The plate and pipe group not only obtained a comparative advantage first among finished steel products in the early 1970s but has also revealed the highest degree of comparative advantage since then. Its RCA reached 0.4 in the early 1980s but then fell to around 0.2 in the late 1980s. Self-sufficiency in this product group grew rapidly from less than 0.5 in the period 1966-68 to almost 0.9 in and after the late 1970s.
Following the plate and pipe group, long products acquired a comparative advantage in the late 1970s. Compared to other rolled products, long products showed relatively low degrees of export orientation and import competition, as suggested by smaller DX and DM levels in Table 4.7, but high self-sufficiency throughout the whole period. This was reflected in the pattern of changes in comparative advantage in long products - compared to flat products, on the one hand, relatively low levels of comparative disadvantage when the Korean steel industry was at the underdeveloped stage (that is, smaller I RCAs I, when RCAs<0, until the early 1970s) but, on the other
hand, relatively slow growth of RCAs when the industry developed rapidly in the 1970s and relatively low degrees of comparative advantage when the industry enjoyed overall comparative advantage in finished steel products in the 1980s. Korea eventually lost comparative advantage in long products, after reaching a peak RCA level of about 0.2 in the mid-1980s, and was in a state of comparative advantage neutral (RCA = 0) in long products as of the period 1989-90.
Throughout the 1970s and the 1980s, larger changes took place in Korea's trade in HR/CR products. Until the early 1980s, HR/CR flat products exhibited the lowest degrees of comparative advantage among finished products. Nevertheless, as the Korean steel industry developed rapidly from the early 1970s, the RCAs of HR/CR flat products gradually improved from about -0.5 in the period 1966-68 to more than -0.2 in the mid and late 1970s (Table 4.7). From the early 1980s, HR/CR products also obtained comparative advantage. As the Korean steel industry continued to grow in the
late 1980s, the RCAs of HR/CR products exceeded those of long products. Compared to long products and plates, HR/CR products exhibited greater engagement in international trade and hence lower self-sufficiency levels, due perhaps to their greater complexity and diversity in terms of product mix than other product groups, on the one hand, and scale constraint in production and domestic demand, on the other. Throughout the 1970s and 1980s, import dependence on these products was much higher than on other finished steel groups, though falling over time from about 0.6 in the early 1970s to 0.2 in the late 1980s. Export dependence was also higher than the finished steel averages during this period.
Even though overall trade dependence on finished steel fell and self-sufficiency rose with development of the steel industry, intra-industry trade continuously increased over time, as suggested by the trade theory incorporating the importance of scale economies (see the IIT columns in Table 4.7). In the 1970s, during the early period of rapid steel industry development, relatively less capital-intensive rolled products such as plates, pipes and long products, which exhibited relatively high comparative advantage at the time, were engaged in intra-industry trade to a greater extent than HR/CR products.^® However, in the 1980s as the Korean economy attained high levels of industrialisation alongside rapid growth of the steel industry, the degree of intra- industry trade in the relatively more capital-intensive HR/CR products rose faster and showed larger values of the index than other products.
In the 1970s, the Korean iron and steel industry underwent more changes in its production capacity of upstream processes such as manufacturing of crude steel and pig iron following the construction of POSCO. Domestic demand for these products also rapidly increased as the nation's rolling sector expanded. Despite Korea's backward integration of its iron and steel industry as discussed in Chapter 3, the output growth in these sub-sectors stayed within domestic demand, perhaps because that the growth of the iron-making sector was constrained by scarce domestic supply but rapidly increasing imports of raw materials such as iron ore and coking coal (see Table 3.2 and Figure 4.5). The nation's iron-making capacity, in POSCO's integrated iron and steel- making system, was limited to the extent it could only meet the crude steel capacity of the integrated steel works. Korea's crude steel capacity in POSCO and in some electric arc firms did not expand beyond rolling capacity. The RCAs in these products did not rise as high as in rolled products. Nevertheless, Korea's steel-making and iron-making retained RCA levels close to 0 from the mid-1970s, even though pig iron trade showed increasing imports with almost no exports (and hence almost no intra-industry trade)
20. While the degrees of IIT in HR/CR products ranged between 0.15 and 0.45 during the 1970s, those in long products and in plates and pipes were between 0.20 and 0.55 and between 0.20 and 0.70, respectively, during the same period.
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Since the early 1980s and semi-finished steel trade recorded net imports again after the mid-1980s. Another feature of these sectors was that, since the mid-1970s, trade dependence (and both export and import dependence) was much lower at around or less than 0.1 but self-sufficiency ratios were high, at a level close to 1.0, though they dropped slighdy in the period 1987-90 (Table 4.7).
These data are consistent with the framework proposed in this thesis. There were substantial changes in the structure of comparative advantage within Korea's iron and steel industry, which included the increasing importance of more capital and technology intensive HR/CR products in Korea's finished steel production, consumption and trade, rising index values of intra-industry trade and the growth of steel-making and iron making constrained by increasing import dependence on raw materials.