The Limited Performance of the United States in Exporting Manufactured Products to Korea

Abstract

The share of United States in Korea's total imports did not increase between 1985 and 1987 despite the sharp depreciation of the dollar against the yen and Korean trade policies to increase imports generally from the United States. The U.S.'s share rose in 1988, but the increase was small and slow. This paper shows that Japanese suppliers aggressively reduced yen prices to defend the Korean market; Japanese products far outcompeted American goods in non-price areas; and U.S. firms did not have the capacity or the appropriate products to serve the Korean market. Our findings suggest that U.S. exporters need to improve in both price and non-price areas in order to sell to Korean buyers. This paper also proposes that joint Korean-U.S. efforts be directed toward opening and penetrating the Japanese market.