Policy Reference
Publications
Policy Reference
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Europe’s Energy Crisis, National Policies and Industrial Production: Insights for South Korea
This study analyzes Europe’s policy responses after the energy crisis after the Russian-Ukrainian war and examines the impact of policy measures on industrial production. Although the mild winter of 2022 resulted in lower-than-ex..
Yoonjung Kim and You Jin Lim Date 2023.08.28
industrial policy, energy industryDownloadContentSummary<This study analyzes Europe’s policy responses after the energy crisis after the Russian-Ukrainian war and examines the impact of policy measures on industrial production. Although the mild winter of 2022 resulted in lower-than-expected energy demand, and energy prices have stabilized since the end of 2022, there is uncertainty about the severity of the winter in 2023 and the war is showing signs of prolongation. While Europe is using the energy crisis as an opportunity for the green transition, Europe is also accepting that it will continue to use fossil fuels, including liquefied natural gas (LNG), for at least the next decade and possibly even longer.The fact that Europe can no longer rely on fossil fuel supplies from Russia has significant implications for Korea, which is a net energy importer, as it may be affected by the increasing demand from Europe in the international energy market. Analyzing Europe’s policy measures on energy crisis provides important policy recommendations for potential energy price surge in South Korea due to the additional international energy demand.Chapter 2 explores the background of the energy crisis in Europe after the Russian-Ukrainian war, and explores the link between rising energy prices and inflation.We analyze the various policies implemented by the national governments of three European countries to mitigate the impact of the energy crisis, namely Germany, France, and the United Kingdom. The study demonstrates a significant increase in energy prices, providing justification for the implementation of national policy measures. We show heterogeneity across countries, including dependence on Russian energy, available fuel types, and the different institutional contexts, and further investigated the policy packages in each country. In France, the impact of rising energy costs has been relatively small, and the main policies were tax reductions on energy Imposing price caps. In Germany, tax cuts and universal household assistance were the main policy measures, with additional subsidies for energy-intensive industries. The U.K. government utilized targeted support unlike other countries, leveraging its administrative capacity. This targeted support encompasses providing cash assistance for vulnerable households and granting automatic discounts on household energy bills.In Chapter 3, we use information on the timing of the introduction of energy crisis policies in major European countries to analyze whether these policies were meaningfully related to industrial production. Using fixed effect models and policy timing to reduce electricity prices in Germany and France, we examine the correlation between the industrial production index and energy crisis policies through their impact on energy prices. Our findings indicate that the policy intervention was positively correlated with industry production. By employing two-stage least squares regression, we find that the policy implementation was negatively correlated by approximately 40-euro reduction of wholesale electricity price, and 100 euro increase in wholesale electricity price was correlated with reduction in industry production index by approximately four percent relative to the average industry production within the sample period. Additionally, we also conduct heterogeneity analyses to investigate the potentially different correlation between the energy crisis responses and energy-intensive industries, but our analysis does not yield conclusive evidence of significant heterogeneity across different industries.From our analysis, we recommend that the energy crisis policy should prioritize assisting the most vulnerable consumers. Imposing a cap on price growth or reducing energy prices or taxes can result in price distortion and regressive taxation. In the event of an energy crisis, we suggest implementing targeted policies that benefit low-income households to optimize the government's budget efficiency and protect vulnerable households. In order for this policy option to be administratively feasible, the government must possess the capacity to identify eligible households and have streamlined procedures to efficiently deliver assistance without imposing excessive institutional barriers for applicants. In South Korea, Energy Voucher Program is limited to certain types of low-income families such as single mothers, the elderly, and other public assistance recipients, and the categorical eligibility should be expanded to include other low-income households that do not fall within these categories. If there is any consideration for implementing price reductions on energy, we suggest implementing price brakes to incentivize the reduction of energy demand and encourage more efficient energy utilization.This study provides valuable insights to the existing body of research by examining the relationship between energy crisis response policies and industrial production in the context of recent events such as the Russian-Ukrainian war and the energy crisis. To optimize the utilization of government resources, it is recommended to investigate this issue by analyzing firm-level data and actual energy prices paid by companies. Such approach can provide more informed policy recommendations for industries facing significant challenges due to high energy costs. -
The Effects of Robotization on Foreign Direct Investment
This study aims to investigate the effects of robotization on foreign direct investment (FDI). We address this research question by providing a theoreti-cal prediction derived from a simple model and then empirically testing our p..
Sungwoo Hong et al. Date 2023.08.03
industrial structure, foreign direct investmentDownloadContentExecutive Summary1. Introduction2. Robotization and FDI: Conceptual Frameworks3. Data and Econometrics3.1. Data3.2. Econometrics4. Empirical Results5. Discussion5.1. Regional Heterogeneities5.2. Origin of Regional Heterogeneity: Role of Manufacturing and Education6. Concluding RemarksReferencesAppendixSummaryThis study aims to investigate the effects of robotization on foreign direct investment (FDI). We address this research question by providing a theoreti-cal prediction derived from a simple model and then empirically testing our prediction. Theoretically, we found that an exogenous rise in industrial robots depresses both the robot rental rate and the domestic cost of task execution. Thus, it is more profitable to perform more tasks at home, leading to a de-crease in FDI. Empirical results are summarized as follows. First, an increase in robotization in source countries negatively affects outward FDI. Second, this negative effect is not consistent across global regions.< -
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Research on Green Energy Cooperation with East Africa
Sub-Saharan Africa is under pressure domestically and from abroad to achieve both economic growth through better access to energy and a sustainable environment through decarbonization simultaneously. Africa has generated energy th..
Munsu Kang et al. Date 2023.06.08
energy industry Africa Middle EastDownloadContentSummary<Sub-Saharan Africa is under pressure domestically and from abroad to achieve both economic growth through better access to energy and a sustainable environment through decarbonization simultaneously. Africa has generated energy through renewable sources such as hydro-power and geothermal energy but demand for stand-alone energy generation has increased recently to improve access to energy in the rural areas. In addition, green energy has gained importance for rural energy access as the unit costs of solar and wind energy generation dropped rapidly. This research examines East Africa’s demand for green energy and current policies, together with cooperation measures in the international community, and analyzes reasons for applying solar energy technology through a case study designed to derive policy implications on Korea’s energy sector cooperation.Chapter 2 examines the energy access and green energy development status of Africa on a state level. Access to clean energy for power and cooking have improved considerably across Africa but the absolute access rate remains low compared to other regions. The study further examines energy access and green energy policies for Uganda, Kenya and Tanzania in particular. The three countries all have policies to improve energy access especially for the rural areas, and have established rural energy administrations. They also seek to establish a foundation for rural energy access through small-scale energy generation by introducing stand-alone generation facilities in the rural areas, in addition to the conventional electrification policies. To this end, private sector participation in the energy market is crucial, and thus governments in the region seek to provide incentives for small-scale energy generation by private companies. In regard to policies, Kenya’s policy index is high while that of Tanzania and Uganda need improvement.Chapter 3 derives implications for Korea by examining the cooperation strategies and policies of international organizations such as the World Bank and UNDP, as well as partner countries including the US and Sweden regarding the green energy sector in East Africa. The US seeks to increase the region’s generation capacity up to 30,000MW by 2030 and provides large scale support to Africa’s energy sector through its Power Africa initiative. Solar energy and wind power consists up to 33% and 15% each in the program, emphasizing the importance of green energy for the US. Kenya and Tanzania are the prime beneficiaries of the Power Africa initiative among the 30 countries in participation. EU’s Africa Europe Energy Partnership (AEEP) seeks to provide electricity to 100 million people by 2020 through hydro, wind and solar energy to improve green energy supply, strengthen energy security between the EU and Africa, and to increase energy efficiency in Africa. EU member countries have formed a Team Europe platform with institutions such as the European Investment Bank, and European Bank for Reconstruction and Development, through which it seeks to create a green energy initiative, as well as an environment for green energy production and investment. The World Bank and UNDP have led support to improve energy access and increase energy efficiency in Africa among international organizations. Support is given to hydro and offshore wind power as well as for stand-alone solar energy as access to electricity and the increase of green energy power generation have become the core objectives of these institutions.Finally, Chapter 4 analyzes the reasons for solar lantern usage and draws implications for solar energy cooperation from the Tanzanian case study. The results indicate that high female participation in the Solar Cow project and the will to study were the main reasons behind solar lantern usage. However, some residents did not participate willingly in the project due to the charging policy. This shows that understanding the willingness to pay is as important as understanding the demands for green energy technology is crucial to increasing the effectiveness of the project. A pre-analysis of the recipients and some form of participation compensation is required when performing development cooperation projects for green energy.Four implications can be drawn from this study. First, collaboration between East Africa and Korea is needed to improve the green energy policy environment in East Africa. Among the East African countries, Tanzania and Uganda’s institutional development is weak, while green energy related regulations and incentive policies need to be newly implemented. Institutions such as the Rural Electrification Agency and rural electrification policies have been established to provide the rural areas with electricity, but there is room for further collaboration in the actual implementation of these policies. Accordingly, cooperation on policy improvement to expand energy access and green energy adoption in rural areas of East African countries should be discussed.Second, green energy related projects could be expanded. Korea only has a limited number of energy related projects in Africa, which are mostly in the form of loans. However, when looking at the electrification strategies of international organizations and partner countries using green energy, cooperation in the green energy sector can be expected to increase in the future.Third, institutional mechanisms that promote the participation of energy companies and institutions are needed. This study suggests the expansion of financial support for companies investing in the African power market, the creation of an information sharing platform for the energy sector, and the increase of participation in the African power generation market as the main cooperation strategies.Fourth, there is a need to diversify green energy cooperation. The demand for solar energy is generally high but that is the same for wind, hydro, geothermal and other sources. The efficiency of education and health-sector related projects can be improved by supporting energy access and generation of education and health facilities. There is a need to gradually expand cooperation on clean cooking energy sources, as it is also in high demand. Most importantly, a system to support human development and equipment management is needed once a projects ends for further maintenance.Improving energy access and energy efficiency will continue to be important issues in East Africa. Support for the energy sector not only affects economic activities but also other sectors such as education and health care, and is expected to be further linked to gender inequality and support for the vulnerable. East Africa’s population in particular is larger than that of other regions in sub-Saharan Africa, and so is the demand for energy accordingly. In consideration, expanding energy cooperation between Korea and East Africa is expected to contribute to the socio-economic development of East African countries in the mid- to long-term. -
Global Efforts to Achieve Carbon Neutrality in the Industrial Sector and Implications: Focusing on SMEs
The international community has stepped up efforts to achieve carbon neutrality or net zero emissions and has begun to expand the scope of greenhouse gas management to all companies in the supply chain. In particular, the decarbon..
Eunmi Kim and Sunghee Lee Date 2023.05.28
industrial policy, environmental policyDownloadContentSummary<The international community has stepped up efforts to achieve carbon neutrality or net zero emissions and has begun to expand the scope of greenhouse gas management to all companies in the supply chain. In particular, the decarbonization of industries that emit large amounts of greenhouse gases is an important task for countries not only to effectively respond to climate change, but also to improve their energy security and international competitiveness. Although decarbonization can be achieved by all companies regardless of their sizes, small and medium-sized enterprises (SMEs) are struggling with a lack of resources and capabilities. Therefore, the purpose of this study is to analyze the characteristics of national and multilateral carbon-neutral strategies, identify policy demands of SMEs based on survey results, and derive implications for the decarbonization of the industrial sector and, in particular, SMEs in Korea.Chapter 2 mainly analyzes policies to reduce greenhouse gases in the industrial sector and cases of multilateral cooperation between both major governments and global companies. Sweden, Germany, the United States, the UK and Japan are increasing their financial support for decarbonization efforts in their industrial sectors, also rearranging relevant policies and institutions. Sweden is working closely with the EU and its local governments to support carbon reduction projects, and also subsidizes investments with greenhouse gas reduction benefits but not expected to generate a return on investment without subsidies. Germany is inducing technological innovation and international cooperation among SMEs. The United States is expanding its investment in clean energy and providing research and development funding to SMEs and startups through federal agency-level programs such as SBIR/STTR programs. The UK is promoting decarbonization particularly in high-emitting industrial clusters, and is stimulating private investment through public funding for technology innovation. Japan is expanding its financial support in this area, for instance through tax benefits for companies pursuing green transformation (GX), and helping SMEs and startups enter or expand their business in developing countries through funds including Official Development Assistance (ODA).While introducing internal regulations to reduce greenhouse gas emissions, global leading companies demand that their partners participate in these efforts. The steel, chemical, consumer goods, electronics manufacturing and automobile manufacturing industries focus on supply chain management to achieve their carbon neutrality goals. Suppliers of these industries are required to establish and achieve reduction targets, and are encouraged to comply with the low-carbon purchasing guidelines or environmental codes of conduct. The companies provide education programs, consultation services and financial support for subcontractors to achieve carbon neutrality. Multilateral initiatives in which companies voluntarily participate include the RE100, 24/7 CFE, the Alliance of CEO Climate Leaders, and the SME Climate Hub.Chapter 3 reviews the policies and systems in place to support decarbonization for SMEs in Korea and analyzes the results of the survey conducted for this study. The emission data shows that SMEs in Korea produce less emissions than large corporations, but their emissions are high compared to energy consumption and the major emitting industries are diverse. SMEs remain at a relatively low level of competitiveness in climate technology, and the environmental performance of domestic SMEs measured by ESG scores also ranked at the bottom among major countries (7 countries). Domestic systems that support the decarbonization of SMEs can largely be divided into programs to introduce existing reduction facilities and fuel conversion and promotion measures for research and development of future reduction technologies. The introduction of reduction technologies and facilities is mainly carried out in a package format including site diagnosis, consulting, planning, purchase and construction, which is the biggest difference from the cases of major countries reviewed in Chapter 2. In addition, the emissions reduction technology development through cooperation between SMEs and research institutes, support for start-ups and growth, and financial support for corporate decarbonization efforts are also being carried out.According to the results of our survey conducted on Korean SMEs, only 5.2% of 250 respondents were tracking their greenhouse gas emissions. The most common way to reduce greenhouse gases was “energy saving,” with few SMEs responding they had the ICT-based infrastructure needed for energy management. Based on the first and second cumulative responses, “lack of response funds” (21.3%) and “difficulty in determining reduction efforts best for the company” (17.5%) were representative difficulties in pursuing reduction efforts. In particular, the support policies most desired by the respondents were “expanding the use of renewable energy,” “improving energy efficiency” and “expanding new energy (green hydrogen),” in that order. It is noteworthy that each policy chosen as a priority has a different desired support method or support period, and long-term support of more than five years is required in terms of related technology development or preparation for supply chain due diligence.Based on the above analysis results, this study identified the following directions to promote decarbonization in the industrial sector and SMEs: enhancing policy effectiveness, promoting technological innovation, spreading the management system for decarbonization, and strengthening international cooperation. Specific implications for each direction are as follows.First, in order to enhance policy effectiveness, the government should introduce new programs to support the entire process including searching, applying for and managing suitable programs for SMEs, and strengthen the roles of various stakeholders such as local governments, large corporations, and private investors. In particular, a large number of SMEs (77.8%) responded that they did not know much about decarbonization-related support programs. This suggests that support for SMEs is necessary from the first step of searching and applying for projects. It is also necessary to monitor and improve the overall support projects carried out by various ministries and agencies, and to closely evaluate and monitor ongoing or completed government programs.Second, with the goal of technological innovation for decarbonization, related ministries and public agencies should expand long-term support for more than five years, encourage private investors to participate, and strengthen the evaluation of expected effects of technological innovations toward reducing greenhouse gas emissions. It is necessary to nurture start-ups and small sized-enterprises with the capacity of developing innovative technologies with excellent reduction effects, and invest in their projects from a long-term perspective. In particular, investment support in the public sector should benchmark existing greenhouse gas reduction effects, such as realized in Sweden, when selecting recipients. It is also necessary to review policies to expand the scale of investment by attracting various partners from the private finance sector, as shown by the UK case.Third, companies need to incorporate decarbonization into their business management system and strengthen their capabilities to collect and manage environmental data including carbon emissions. It is important to establish ICT-based infrastructure and energy management systems considering the companies’energy consumption targets. Moreover, it is also necessary to actively publicize success stories and share information so that companies do not perceive carbon neutrality or decarbonization as little more than an obligation or unnecessary burden, and rather utilize these initiatives as a new growth engine.Lastly, active exchanges of information and cooperation between companies within and across the sectors are recommended. Korean SMEs need to pay more attention to multilateral voluntary initiatives (RE100, 24/7 CFE, SME Climate Hub, etc.) for decarbonization. Benchmarking the cases of Sweden and Japan, the government should increase the SMEs’access to participating in clean energy and energy efficiency projects in developing countries. -
A Study on the Korean Model Law of Digital Trade Agreement
The purpose of this research is to provide necessary information to prepare a basic model law for the digital trade agreement that Korea will conclude. And more, this study analyzes the “forms and contents” of several digital tr..
Hyunho Kwon et al. Date 2023.05.26
E-trade, electronic commerceDownloadContentSummary<The purpose of this research is to provide necessary information to prepare a basic model law for the digital trade agreement that Korea will conclude. And more, this study analyzes the “forms and contents” of several digital trade agreements concluded so far, and presents practical considerations that need to be reviewed from a legal and policy perspective when Korea has a chance to conclude digital trade agreements in the future.To this end, Chapter 2 presents specific grounds to establish the Korean digital trade agreement model at the formal or structural level. This is a formal and structural approach to consider for setting the model of digital trade agreements. To solve this problem, this study conducts a detailed review in two main aspects. First of all, the implications of the multilateral discussions on the digital trade agreement will be analyzed. Through this study, it is possible to examine the various forms or structures of digital trade agreements that appear in multilateral discussions themselves. On the other hand, what needs to be addressed in the process of forming a more realistic model is the formal aspect of digital trade agreements through bilateral, regional and plurilateral agreements or multilateral agreements. This approach will be the most realistic solution for Korea or most countries. In particular, there are various types for regulating digital trade through bilateral, regional and plurilateral agreements or multilateral agreements, such as those attached as part of FTAs or RTAs, and those concluded as independent trade agreements regardless of FTAs such as DEPA or KSDPA. Therefore, Chapter 2 presents various trade legal and policy implications, such as the meaning and characteristics of digital trade agreements concluded in different forms, and problems according to the legal perspectives of the agreement itself, which helps Korea set a model agreement.In addition, the core of Chapter 3 is the analysis of the content aspects of digital trade agreements. Here, the content aspect refers to the degree of liberalization consequently raised in the composition and content of the agreement provisions that Korea should consider when signing a digital trade agreement. In other words, this aspect is connected to the degree of liberalization of the object in the conclusion of digital trade agreement. Therefore, Chapter 3 analyzes the contents of existing digital trade agreements, examines the specific and acceptable contents and scope that should be included in digital trade agreements from Korea’s point of view, and presents the basis for determining whether it can be discussed at the level of liberalization. The research topics in Chapter 3 are basically analyzing the current situation in the digital trade and examining the results and limitations of digital trade agreements that have already been implemented in the international relations. In particular, Chapter 3 provides the meaning and limitations of the digital trade agreement model to be concluded in the future based on the analysis of the contents of digital trade agreements made at the previous bilateral and regional levels.As results of these studies, Chapter 4 of this research first evaluates existing digital trade agreements and proposes the direction of the model of digital trade agreements that Korea should maintain. In addition, as a result of this analysis, the characteristics of Korea’s digital trade agreement model are reviewed at the formal and content level, and the direction of the Korean digital trade agreement model is presented. Through this analysis, Chapter 4 classified the direction of the Korean model of digital trade agreements into the form of updating existing trade agreements, participating in open plurilateral agreements, and signing strategic digital partnership agreements, and analyzed their formal characteristics and implications for Korea. And as a result of this analysis, the model of the Korean digital trade agreement was presented by dividing it into a model based on traditional standards and a model based on the so-called ‘new standard.’Finally, Chapter 5 completes the entire research by reviewing the problems that may arise in the future for digital trade. To this end, Chapter 5 proposes factors to be considered in terms of the maintenance of the domestic legal system according to the previously proposed Korean digital trade agreement model. In addition, in connection with the definition or scope of digital trade, Chapter 5 examines the problems or characteristics raised in the process of discussing the expansion of digital trade agreements into digital partnership agreements and further into digital economic agreements. And finally, Chapter 5 briefly examines legal policy problems that may be raised from the perspective of digital transformation, that is, the future transition to an industry that can be digitized in the future. -
The Impact of Trade Liberalization on Consumer Welfare: A Focus on Quality Diversity
This study investigates the impact of domestic price changes due to external shocks such as trade liberalization or global inflation on quality diversity and consumer welfare. Free trade agreements (FTAs) can reduce the prices of ..
Chul Chung et al. Date 2023.05.25
trade policy, free tradeDownloadContentSummary<This study investigates the impact of domestic price changes due to external shocks such as trade liberalization or global inflation on quality diversity and consumer welfare. Free trade agreements (FTAs) can reduce the prices of imported goods through tariff elimination or reduction, making it crucial to evaluate academically and in terms of policy how this price reduction affects consumer welfare. In contrast to prior literature on trade liberalization, this study emphasizes the role of quality diversity in explaining its impact on consumer welfare. We focus on how consumers’ qualitative responses to price changes, such as selecting high-quality products when prices decrease due to tariff reductions or responding to price increases due to tobacco taxes by adjusting the quality of their purchases, can influence consumer welfare. This study also provides policy implications regarding the impact of trade liberalization on consumer welfare.Using time-series data on wine and cigarettes in South Korea, this research estimated price elasticities and separated them into consumers’ quantitative and qualitative responses to price changes. The results indicate that the qualitative margin accounts for as much as 40% of the total, demonstrating that consumers’ qualitative responses to price changes are quite significant. We also found a statistically significant consumer behavior mechanism of quality shading in response to price increases for both wine and cigarette consumption, suggesting that consumers’ qualitative responses are as important as their quantitative responses. Moreover, we found that price reductions not only increase the consumption quantity of the same product but also lead to a shift to higher quality products, further enhancing consumers’ welfare. For the first time in the literature, we analyzed qualitative margins by income level and found that the price elasticity is higher for lower-income consumers, and most of it can be attributed to qualitative responses. These empirical findings suggest that consumers can adjust their spending on a particular good through qualitative adjustments while maintaining their overall consumption, particularly in response to rapid inflation. This response mechanism is particularly more effective for low-income households.Similarly, this study confirmed the existence of consumer quality adjustment responses to income changes through income elasticity analysis, with the size being larger among low-income households. Qualitative responses to income changes demonstrate that consumers can adjust their expenditure by maintaining the consumption level of staple goods such as rice or pork while reducing the expenditure amount, particularly in situations of declining real income during economic crisis. As with the analysis of price changes, our results suggest that this consumer behavioral mechanism in response to income changes can be also more effective for low-income households.The findings of this study indicate that trade liberalization’s expansion of quality diversity has a positive impact on consumer welfare by strengthening consumer mechanisms, particularly in response to inflation, drastic price changes, and real income declines during economic crises. These results provide a novel perspective on trade liberalization’s contribution to consumer welfare, with the analyzed quality diversity effect distinct from the product diversity described in traditional trade literature, thus representing a new source of gains from trade. Consequently, when assessing trade liberalization’s economic impacts, the quality diversity factor should also be considered. In addition, this study demonstrated that quality diversity expansion for consumers can be achieved for agricultural products through not only agricultural production policies but also trade liberalization. The resulting policy implications are significant for both average consumers and low-income groups in terms of welfare.However, the qualitative response of consumers to price changes may not always improve policy efficacy, particularly for certain types of goods, such as harmful goods taxes, where product quality diversity may not necessarily have a positive impact and can even have a negative one. For instance, if consumers switch to low-quality cigarettes in response to an increase in cigarette taxes, the quality-downgrading response may ultimately have adverse effects on health indicators related to cigarette taxes. Furthermore, when discussing harmful goods taxes, such as soda taxes and fast-food taxes, to combat obesity problems, the expansion of quality diversity can have the opposite effect, increasing the supply of unhealthy low-quality carbonated drinks or fast food. These discussions hold significant policy implications, indicating that to achieve health policy objectives through harmful goods taxes, it is necessary to prevent low-quality goods from entering the market, which could pose greater health risks. Finally, empirical research follow-up is needed for staple goods such as rice or pork, with future studies needing to consider consumers’ qualitative responses when using price elasticity. -
Recent Regulatory Trends in Mega FTA SPS Chapters
Previous studies on mega Free Trade Agreement (FTA) Sanitary and Phytosanitary (SPS) provisions have primarily focused on the translation and preparation required for implementing the SPS regulations outlined in the Comprehensive ..
Minji Kang Date 2023.05.19
trade policy, free tradeDownloadContentSummary<Previous studies on mega Free Trade Agreement (FTA) Sanitary and Phytosanitary (SPS) provisions have primarily focused on the translation and preparation required for implementing the SPS regulations outlined in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). However, in order to gain a comprehensive understanding of the current state of SPS regulations in recent FTAs, this study goes beyond the CPTPP and also includes the Regional Comprehensive Economic Partnership (RCEP), which is currently the largest FTA in existence and came into effect in Korea in February 2022. Additionally, the study compares these regulations with those of the United States-Mexico-Canada Agreement (USMCA).In addition to examining the SPS provisions of these mega FTAs, this study also investigates the status of domestic legislation related to SPS regulations in four specific areas: livestock quarantine, plant quarantine, fishery quarantine, and food quarantine. By conducting this analysis, the study aims to provide a comprehensive overview of the SPS chapter regulations in these mega FTAs as well as the domestic measures implemented in relation to SPS in the aforementioned sectors.Prior to the introduction of the Mega FTA, all of Korea’s bilateral FTAs included SPS provisions or chapters, but few included WTO Plus provisions. Furthermore, most bilateral FTAs specified that the dispute settlement procedures of the FTA would not be applicable to SPS provisions or chapters. The primary WTO SPS Plus provision found in these FTAs was the inclusion of an FTA SPS Committee, which served as a platform for bilateral discussions on SPS issues and facilitated information exchange. Additionally, depending on the FTA partner, FTA SPS chapters included WTO Plus provisions such as regionalization procedures, risk analysis in their own country, and cooperation on animal welfare.However, there has been a notable shift in this trend with the introduction of Mega FTAs. The SPS chapters of the CPTPP, the RCEP, and the USMCA have witnessed a significant increase in the number of provisions. On average, these mega FTAs contain 18.3 provisions in their SPS chapters, which is considerably higher than the average of 5.7 provisions found in Korea’s previously concluded FTAs.The SPS chapters of these mega FTAs encompass a range of WTO SPS plus provisions. These provisions cover various aspects such as regionalization, equivalence, risk analysis, emergency measures, audit, certification, import inspection, transparency, and more. The inclusion of these provisions demonstrates a greater emphasis on enhancing and expanding the regulatory framework related to sanitary and phytosanitary measures within the mega FTAs.The CPTPP and USMCA acknowledge the importance of adapting to regional conditions, including the concept of compartmentalization, as a means to facilitate trade. While the CPTPP and USMCA do mention this approach, they do not explicitly outline specific obligations regarding compartmentalization, unlike the EU-Japan Economic Partnership Agreement (EPA) which recognizes the concepts of zones and compartments as defined in the OIE Terrestrial Animal Health Code and OIE Aquatic Animal Health Code.However, the Mega FTAs do aim to enhance the transparency of the regionalization process by incorporating non-binding procedural provisions outlined in the Guidelines to Further the Practical Implementation of Article 6 of the Agreement on the Application of Sanitary and Phytosanitary Measures (G/SPS/48). By mandating these provisions, there is an expectation that the transparency surrounding the regionalization process will improve. It is worth noting that the Mega FTAs commonly impose the obligation to consider international standards, guidelines, and recommendations, necessitating the identification of trends in the establishment of such standards by international standard- setting bodies (ISSBs).The SPS chapters of the CPTPP and USMCA require the application of equivalence for a measure, a group of measures, or on a systems-wide basis, “to the extent practicable and appropriate.” It is worth noting that the Mega FTAs also share the characteristic of incorporating increased transparency regarding various procedural requirements in the application of equivalence.The Mega FTAs introduce the notion of “risk analysis,” which encompasses not only the “risk assessment” outlined in the WTO SPS Agreement but also includes the concepts of “risk management” and “risk communication.” This expanded perspective strengthens the procedural obligations related to SPS measures within these FTAs. In addition, except for emergency measures, if an importing Party has permitted the importation of a product from another Party at the time it initiates a review of SPS measures, it shall not suspend the importation of that product solely because the importing Party is conducting a review.The Mega FTA SPS Chapters enable Parties to take the emergency measures they deem necessary to protect food safety, and human, animal and plant health. In addition, the Mega FTAs introduce an audit provision that were not included in the WTO SPS Agreement. These provisions establish specific rules and procedures to prevent different audit-related regulations in different countries from becoming trade barriers, especially when it comes to conducting on-site due diligence.The Mega FTAs have implemented provisions to ensure that certification requirements only require information related to SPS issues to the extent necessary. Import checks for SPS requirements are based on the actual potential risks posed by the import. The Mega FTAs also include provisions to enhance transparency, such as allowing at least 60 days for other Parties to provide written comments after, notification of a proposed or changed SPS measure.Korea has undertaken significant legislative revisions to align with the quarantine requirements of the Mega FTAs. With the exception of fishery quarantine, the country appears to be well-prepared and continues its efforts to enhance preparedness. However, despite having established these legal frameworks, there may be challenges in effectively conducting risk analysis for quarantine purposes.In addition to legislative improvements, it is crucial to address the demands of the Mega FTA quarantine environment through additional measures. This includes providing training for professionals in the field and expanding financial resources and infrastructure. These efforts are essential to ensure that border quarantine measures are not compromised in practice. Notably, the CPTPP and USMCA explicitly specify the application of FTA dispute settlement procedures to SPS chapters, enabling disputes to be resolved swiftly. However, in the case of RCEP, the decision on whether the SPS chapter will be subject to the FTA dispute settlement procedure is set to be discussed two years after its entry into force. Given the potential for SPS-related disputes within the Mega FTA quarantine environment, it is imperative to be prepared for such scenarios.In particular, considering the trade concerns that have emerged in recent discussions at the WTO SPS Committee, issues such as regionalization and equivalence recognition are of utmost importance. It is crucial to develop legislation based on a comprehensive understanding of relevant international laws and to provide training for trade experts to effectively address these matters.The Korean government is currently participating in IPEF negotiations. Some US agricultural companies have proposed that the IPEF Pillar 1 agriculture sector negotiations be based on the CPTPP and USMCA SPS chapters, indicating that the influence of Mega FTA SPS chapters will continue to strengthen in the near future.Furthermore, there is a possibility that the Mega FTA SPS chapter will serve as a reference point in the ongoing negotiations for the improvement of existing FTAs. Considering the difficulties in using FTAs to claim exceptions for violations of the non-discrimination obligations under the WTO SPS Agreement, the establishment of procedural regulations within a single FTA SPS chapter can contribute to enhancing transparency in SPS procedures on a global scale. Therefore, any revision of the FTA SPS chapter should be approached cautiously, taking into account domestic considerations and the potential increase in administrative costs.It is hoped that through the collaborative efforts of the government, industry, and academia, we can successfully navigate the challenging waters of the Mega FTA quarantine environment. This requires careful preparation and consideration of various factors to overcome the obstacles and uncertainties that lie ahead. -
Introduction of the ‘Trade and Gender’ Rules and its Policy Implications
This study examines the latest standard linking trade and gender and suggests policy implications as Korea prepares to introduce the first gender chapter in an FTA.Inclusive growth or sustainable growth approach, an alternative to..
Soo Hyun (Catherine) Oh and Bomin Ko Date 2023.05.06
economic growth, trade policyDownloadContentSummary<This study examines the latest standard linking trade and gender and suggests policy implications as Korea prepares to introduce the first gender chapter in an FTA.Inclusive growth or sustainable growth approach, an alternative to the growing inequalities that have emerged during globalization and trade expansion, is also applicable to trade and women. The discussion on trade and gender is based on the idea that the impact of trade may differ by gender. Factors that prevent women from reaping the benefits of trade include the existence of unique barriers to trade for women; the low level of direct participation in trade by the service sector, where women predominantly work; and the generally small size of firms worked in or owned by women. Therefore, there is a need to elaborate trade policies to provide opportunities for women to participate in trade and to ensure that women share in the benefits of trade, which will lead to quantitative and qualitative economic growth.In response, the WTO adopted ‘the Buenos Aires Declaration on Trade and Women’s Economic Empowerment’ at its 11th Ministerial Conference in 2017, established voluntary reporting in the WTO’s Trade Policy Review Process. WTO, through an informal working group and a dedicated unit on trade and gender, is actively engaged in discussions on women’s empowerment through trade.In FTAs, provisions on ‘trade and gender’ have evolved as follows. The gender standard was first included as a few articles in other chapters, such as labor and development, and then in the late 2010s, as Chile, Canada and others became active international advocates on the issues, a chapter on trade and gender was included in FTAs. In 2020, Chile, Canada, and New Zealand agreed to the Global Trade and Gender Arrangement(GTAGA), which provides a stand-alone text for a trade and gender rules.The ‘Trade and Gender’ chapter in an FTA consists of four main types of provisions. These are: general provisions, provisions citing international agreements, provisions relating to cooperation activities, and provisions on institutional arrangements. The general provisions state that adopting a gender perspective in the economic and trade matters can contribute to inclusive economic growth and emphasize the need to reduce barriers and create opportunities for trade and investment from a gender perspective.The next clause reaffirms the commitment to implement UN conventions such as CEDAW. The Cooperative activities section commits to undertake cooperative activities for the empowerment of women entrepreneurs, detailing specific areas of activity. The committees and points of contact provision provides for the implementation of agreed cooperation activities, review of the operation of the agreement and reporting on its implementation, and monitoring of the impact of other chapters of the FTA on gender equality. Through these provisions, the Committee, comprised of representatives from each Party, is tasked with holding annual meetings, formulating and implementing programmes related to the Agreement, and exchanging information on each Party’s experience. The institutional arrangements clause deals with dispute settlement.Chile has proposed a gender chapter in the Korea-Chile FTA revision negotiations. If a gender chapter is included in the Korea-Chile FTA revision negotiations, it will be the first of its kind in Korea. Korea will need to make political efforts to discuss the scope of acceptable cooperation activities during the negotiation process and use it for domestic reforms.The inclusion of a gender chapter in a trade agreement should be preceded by efforts to build social consensus. In particular, the inclusion of measures to support women traders and enterprises in provisions on cooperation requires building social consensus on the need for such measures. To this end, it will be necessary to present data on the significant under-representation of women in trade, to review the situation in Korea through international comparisons of gender equality indicators, and to analyse and discuss the causes of this phenomenon. In addition, it is necessary to raise awareness that the expansion of gender equality leads to quantitative and qualitative economic growth, and that the international community has normed the link between trade and gender equality on this basis. In Korea, gender equality indicators are among the lowest among OECD countries in terms of economic participation and opportunity, and action is needed to improve them. Since Korea’s industrialization, the labor market has been male-dominated as a result of exports led by large companies in the manufacturing sector, and the gender distribution of workers in different industries has been different, so the expansion of manufacturing exports through trade policy may have contributed to the widening of the gender wage gap.As Korea may be proposed to include a chapter on ‘trade and gender’ in future FTA renegotiations with Canada, the EU, New Zealand and the UK, as in the case of Chile, it is necessary to prepare for this and for the possibility of universal standardization of this issue by preparing in advance a ‘standard draft of a Korean-style FTA chapter on gender’. -
International Conflicts and Economic Interdependence: Implication for Economic Security
In this paper, I suggest a microeconomic foundation on the recent conflict between the United States and China. In addition, I review some formal models of international conflicts that examine the relationship between intern..
Youngseok Park Date 2023.04.28
economic security, international tradeDownloadContentSummaryIn this paper, I suggest a microeconomic foundation on the recent conflict between the United States and China. In addition, I review some formal models of international conflicts that examine the relationship between international conflicts and economic interdependence. Furthermore, I present a simple bargaining model of economic sanctions against a dictatorship country, which are increasingly employed around the world in recent years.<
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