Which nation is a world leader in memory-chip production, has the largest number of PhDs per capita, is a giant auto and electronics manufacturer, exports $100 billion worth of goods annually, and runs an $11 billion trade deficit with Japan? The U.S.? Think again: Korea.

Riding a high-tech boom, Korea is about to become the first country to hit advanced industrial power status since the emergence of Japan. At nearly half a trillion dollars, its GDP is already the 11th-largest in the world. Growing at 7% to 10% annually, that GDP could double within the next decade, bringing per capita income, now at $10,000, to $20,000.

Already, Korean companies are moving beyond their own borders. In the U.S. alone, Korean companies just bought TV maker Zenith Electronics, invested in Steven Spielberg's hot Dreamworks SKG multimedia company, and broke ground on a $1 billion chip factory in Eugene, Ore.

Korea's growing strength is upsetting half a dozen geopolitical applecarts. Korea is openly challenging Japanese and Chinese hegemony in North Asia. Mercantilist to the teeth, Korea's successful state capitalism is competing in Asia with the Anglo-Saxon free-market model of growth.

For America, Korea's new economic power means that it's time for a new contract. Condoning an extreme concentration of economic and political power to quicken growth and ward off communism, the U.S. nurtured a military-industrial-bureaucracy complex that created an export-driven, protected Korean economy. Now, there is a need for significant change. Nontariff barriers and blatant government regulations keep foreign companies out of Korean markets from insurance to telecommunications. Only 4,000 foreign autos were sold in all of Korea last year, while Korea exported 400,000. Foreign investment houses and banks are strictly controlled.

Unlike the situation with Japan, the U.S. is running a rare $3 billion trade surplus with Korea for 1995, thanks to strong exports of capital goods. But Korea still can't expect to be allowed to buy American companies and have open access to the U.S. market without reciprocating. Only through less protectionism will Korea be able to gain entry into the World Trade Organization and the Organization for Economic Cooperation & Development.

Most important, Korea itself would benefit from economic liberalization. Small companies are starving as giant chaebol monopolize bank borrowing and government contracts. Local construction remains shabby, as witnessed by recent bridge, subway, and department-store disasters, in part because foreigners with superior building techniques are banned.

President Kim Young Sam, who will soon visit the U.S., was elected on a platform of economic reform. His reign will join those of the great Silla, Koryo, and Yi dynasties if he succeeds in opening Korea to the larger world it is racing to embrace.

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