Although Northeast Asia functions as a core axis of the global economy, it faces a structural dilemma where economic cooperation is restricted due to political and security tensions between regional states. This study focuses on the cruise industry as a strategic alternative to break through this rigid environment. Due to its nature as a tourism sector, the cruise industry carries a relatively low political burden. However, it generates significant economic ripple effects across both upstream and downstream industries, ranging from port infrastructure development to the advancement of service sectors. Consequently, the industry can serve as a strategic medium for strengthening economic cooperation between nations.

The primary objective of this study is to establish a multilateral cooperation model for Northeast Asia by leveraging the cruise industry and to evaluate its practical feasibility. To do this, cruise trends in global and Northeast Asian markets and policy environments were analyzed, alongside a review of North Korea’s tourism strategies and relevant cases. Furthermore, by analyzing the limitations of existing shipping routes and regional consultative bodies, improvement tasks were derived. Ultimately, by establishing South Korea as a core hub and mediator of the Northeast Asian cruise network, this study proposes a phased policy roadmap to entice North Korea into a multilateral cooperation framework and achieve the advancement of the regional cruise industry.

Unlike previous studies that approached individual topics such as market analysis, national policy comparisons, or inter-Korean tourism in a fragmented manner, this study integrates these to analyze a comprehensive cooperation system connecting the ‘Global-Northeast Asia-North Korea-Multilateral’ levels. In particular, this study offers policy implications that differ from existing research by specifying phased scenarios for connecting North Korean ports of call, while accounting for realistic constraints such as sanctions. Furthermore, it proposes the formation of a working group as a multilateral governance mechanism to support the implementation of these scenarios.

The main contents of each chapter are as follows. Chapter 2 provides an analysis of cruise industry trends and the policy responses of Northeast Asian countries. The global cruise market recorded 34.6 million tourists in 2024, surpassing pre-pandemic levels, but Northeast Asian countries are showing differing policy stances in response. South Korea is moving away from past quantitative growth-oriented approaches and is pursuing the “2nd Basic Plan for Cruise Industry Promotion (2023-2027)” with the goal of a “qualitative transition.” With a vision of “Cruise in Daily Life,” it is focusing on industrial recovery and structural improvement by expanding the domestic demand base, supporting the launch of national cruise lines, and expanding the “Fly & Cruise” model linking air and sea travel. Japan aims to recover to 2.5 million inbound cruise tourists by 2025, significantly strengthening port receptivity and seeking to improve infrastructure and standardize CIQ (Customs, Immigration, and Quarantine) procedures. China aims to transition into a “Cruise Manufacturing Powerhouse,” succeeding in building its own large-scale cruise ships and implementing aggressive market expansion strategies, such as the full implementation of a 15-day visa-free entry policy for foreign tour groups. Russia has established its own development strategy for cruise tourism in response to Western sanctions and is attempting to reorganize its industry around domestic markets and friendly nations. It is concentrating its policy capabilities on modernizing old infrastructure and developing new routes along the Far East and Black Sea coasts.

Meanwhile, existing consultative bodies such as the Greater Tumen Initiative (GTI) and Asia Cruise Cooperation (ACC) are facing difficulties in leading substantial policy coordination due to structural incompleteness— failing to encompass all major regional stakeholders—and a lack of legal binding force. Therefore, the creation of a new dedicated body to supplement these is required.

Chapter 3 reviews North Korea’s tourism development strategy and cruise tourism cases. Under the Kim Jong-un regime, North Korea maintains a stance of “Managed Openness,” utilizing tourism as a means of securing foreign currency and promoting the regime. The recently enacted “Tourism Law” (2023) and “Wonsan-Kalma Coastal Tourism Special Zone Law” (2025) provide institutional support for this strategy. Analysis of past cases, such as the Mt. Kumgang cruises (1998–2004) and the Rason-Mt. Kumgang pilot operation, confirmed that while rich tourism resources and the special zone system are positive factors, vulnerabilities such as lack of infrastructure (port depth, terminals), unfavorable profit structures, and safety issues still persist. This suggests that future cooperation should be designed to compensate for these structural constraints.

Chapter 4 specifies plans for expanding Northeast Asian multilateral cooperation. The core is the construction of a “Multi-nodal Loop Route” that connects four to five countries, going beyond simple bilateral round trips. In the West Sea region, a short-distance circulation model connecting Incheon-Nampo-China (Dalian/Dandong) was proposed, and in the East Sea region, a northern logistics-tourism complex route connecting Sokcho/Busan-North Korea (Wonsan/Rason)-Russia (Vladivostok)-Japan (Sakaiminato) was suggested. In doing so, the operation of small and medium-sized cruise ships and the application of the “Fly & Cruise” model are essential, considering sanctions against North Korea and the shallow water depth (8–11m) of North Korean ports.

Furthermore, to provide an incentive for North Korea’s participation, the study presented an alternative of guaranteeing indirect foreign currency income—within a range that does not violate sanctions—by charging a “Port Stay Fee” on a per-ship or per-passenger basis upon entry. As a governance mechanism to implement this, the establishment of a “Northeast Asia Cruise Cooperation Working Group” under the GTI Tourism Committee, involving member countries such as Korea, China, Russia, and Mongolia, as well as Japan and North Korea, was proposed.

Northeast Asian cruise cooperation should be promoted in stages, considering the sanction environment and infrastructure gaps. The short term is a period for laying the foundation for cooperation, activating the “Northeast Asia Cruise Cooperation Working Group” to share port and navigation information and initiating discussions on standardizing CIQ procedures to solidify the basis for cooperation. The medium term is a period for the expansion of cooperation, pursuing the conditional connection of North Korean ports of call only when safety and compliance with sanctions have been verified. The long term is the stage where the cruise network is completed, establishing a multi-nodal maritime tourism belt connecting five Northeast Asian countries (South Korea, North Korea, China, Japan, and Russia) on the premise of sanction relief and normalization of relations, and maximizing network efficiency by diversifying the functions of each country’s ports. South Korea should utilize its geopolitical advantages to play a leading role as a physical hub of the Northeast Asian cruise network and as a mediator that draws North Korea into the arena of multilateral cooperation.

This study is significant in that it designs a practical multilateral cooperation model mediated by the cruise industry, which possesses low political sensitivity and significant economic ripple effects. Amid ongoing geopolitical tensions in Northeast Asia, it presents a policy path for incorporating North Korea into the regional economic cooperation framework through South Korea’s role as a mediator. However, the phased cooperation scenarios derived in this study depend on the cooperative will of each country and volatile external variables such as the easing of sanctions against North Korea and improvement of inter-Korean relations, thus entailing realistic limitations in determining the timing and speed of actual policy execution. Therefore, future research should reflect scenarios of rapidly changing Northeast Asian situations, involve economic feasibility analysis by route, and carry out specific follow-up studies on legal and institutional detailed designs and financing plans to ensure the stable operation of the proposed multilateral consultative body.

Against the backdrop of growing political, diplomatic, and military- security significance, the strategic value of the Global South has been steadily increasing. The Global South is not an entirely new concept; rather, it constitutes a meta-category encompassing what were previously referred to as the Third World or developing countries, as well as regions sharing geographical commonalities in the Southern Hemisphere and historical experiences of discrimination and structural inequality.

Alongside the rising prominence of the Global South, another critical issue has recently drawn considerable attention in the international community: economic security. This reflects how the economy and security are once again becoming closely linked amid intensifying U.S.–China strategic competition and escalating rivalry over leadership in advanced science and technology. Contemporary discussions of economic security primarily focus on key areas such as supply chain resilience; the enhancement of industrial competitiveness, including the protection of advanced technologies; the prevention of excessive dependence on specific countries through the diversification of trade and investment; and responses to economic coercion (or economic statecraft).

As the importance of both the Global South and economic security has grown, it has become increasingly necessary to conceptualize these two dimensions in an integrated manner and to devise effective policy responses accordingly. Japan and China, both neighboring countries of the Republic of Korea, have already been actively pursuing Global South strategies and linking them closely with their respective economic security policies.

Against this backdrop, this study examines Japan’s and China’s Global South strategies from the perspective of economic security; analyzes the implications of these strategies for Korea’s own Global South strategy; and explores the potential for cooperation among Korea, China, and Japan in areas where economic security policy intersects with Global South strategies.

The analysis suggests that, compared with the Global South strategies of Japan and China, Korea’s approach remains insufficiently systematized. In particular, there appears to be a notable lack of systematic consideration regarding how to formulate and implement a Global South strategy explicitly grounded in economic security concerns. In response, this study offers several policy recommendations.

First, Korea should urgently establish a comprehensive and coherent Global South strategy, supported by a governance framework that brings together actors from government, academia, and the private sector. Policymakers, scholars, and business stakeholders should engage in joint deliberations on how to systematically design and implement a national Global South strategy, culminating in a unified strategic guideline.

Second, the Global South strategy should be closely aligned with economic security considerations and tailored accordingly. Based on a comprehensive assessment of Korea’s economic security environment, detailed analyses are needed to identify priority needs and to determine which Global South countries should be engaged first to strengthen cooperation. In particular, given that stability and progress in inter- Korean relations are crucial for establishing a stable economic security environment, this unique geopolitical context should be actively reflected in the formulation of Korea’s Global South strategy.

Third, institutional frameworks to promote people-to-people exchanges with the Global South should be strengthened. Such exchanges should encompass a wide range of areas, including tourism, international students, and highly skilled talent in science and engineering, and urgent institutional reforms are required to facilitate these interactions.

Fourth, Korea should develop a long-term Global South strategy that can be pursued consistently regardless of changes in political leadership, similar to China’s Belt and Road Initiative and Global Development Initiative (GDI), as well as Japan’s New Policy toward Enhanced Cooperation with Global South Countries.

Along with these implications for Korea’s Global South strategy, it is also necessary to consider cooperation among Korea, China, and Japan. To enhance the effectiveness of their respective Global South policies, the three countries should seek ways to reduce unnecessary competition and expand avenues for mutual cooperation. A representative example is cooperation with African partners. Rather than operating separate and competing platforms for engagement with Africa, the three countries could consider establishing an integrated framework—such as an “Africa + Korea–China–Japan” platform—to pursue more efficient cooperation. However, instead of hastily advancing “Korea–China–Japan + α” cooperation platforms in regions such as Africa or Latin America, a phased approach grounded in a long-term vision would be more appropriate. As an initial area of cooperation, the joint pursuit of secure access to critical minerals—an issue prioritized by all three countries—could be considered.

Finally, it is important to note that trilateral economic security cooperation should not remain confined to institutional or technical dimensions, such as critical mineral supply chains, but should also entail a broader shift in perception. Korea, China, and Japan need to move beyond zero-sum thinking, in which each views the others as competitors or potential threats to national economic security, and instead embrace a win–win perspective that recognizes the possibility of mutual benefit and coexistence. Under such a mindset, the Global South can emerge not as another arena of competition among the three countries, but as a new space for cooperation that generates shared national interests.

While WTO-level discussions on digital trade rules have been delayed, rule-making at the bilateral and regional levels—through e-commerce chapters in free trade agreements (FTAs) and stand-alone digital trade agreements (DTAs)—has advanced rapidly. However, because these agreements differ substantially across countries and over time in both the depth and scope of their provisions, regulatory fragmentation has intensified. At the same time, the rapid development of artificial intelligence (AI) is introducing new challenges to the emerging digital trade order. Issues such as privacy and copyright infringement arising from large-scale data collection and use, data dominance by digital platforms, the spread of misinformation, and heightened cyber security risks fall outside what traditional trade rules anticipated. AI technologies now generate multidimensional implications across data governance, intellectual property rights, competition policy, and ethical and safety standards, thereby heightening the need for domestic regulatory preparedness as well as international cooperation and institutionalization.

Digital trade agreements can be broadly classified into: (1) agreements embedded in FTAs (as e-commerce or digital trade chapters) and (2) stand-alone digital agreements concluded separately from FTAs. The former category can also be typologized—such as U.S.-style, EU-style, and China-style models—for comparative analysis. The U.S.-style model (e.g., TPP, USMCA) typically incorporates, as a dedicated FTA chapter, high-standard and open provisions on cross-border data transfers, prohibitions on data localization requirements (including restrictions on mandating the use or location of computing facilities), and prohibitions on requiring the transfer of, or access to, source code. By contrast, EU-style agreements often include e-commerce disciplines within the services framework; they tend to address cross-border data flows and prohibitions on data localization within a single provision and do not generally include a rule on non-discriminatory treatment of digital products. By contrast, so-called China-style digital disciplines, as reflected in RCEP, tend to remain closer to a “status quo maintenance” approach with respect to the moratorium/non-imposition of customs duties on electronic transmissions, rather than establishing stronger new obligations, and do not include source code protection provisions. They also accord relatively broad regulatory discretion by allowing Parties, where deemed necessary, to apply exceptions for legitimate public policy objectives (LPPO) and national security exceptions with respect to cross-border data transfers. Notably, China’s recent pursuit of accession to DEPA and CPTPP suggests a potential pathway toward engagement with higher-standard digital trade disciplines. Representative stand-alone digital agreements include DEPA and the U.S.–Japan Digital Trade Agreement. Overall, digital trade agreements tend to be more detailed and more binding with respect to core issues—such as data transfers, localization prohibitions, and source code—when they are concluded more recently and when they are negotiated among advanced economies.

Against the backdrop of the AI era, this study examines those areas of digital trade disciplines most closely linked to AI—data governance, technical barriers to trade (TBT), competition, intellectual property rights, and AI regulation and cooperation. It analyzes major economies’ domestic legal frameworks and the current state of digital trade rules, anticipates the direction of AI-era digital trade norms, and explores implications for Korea’s regulatory strategy.

From a data governance perspective, the EU has developed a dual structure—promoting the free flow of data within the internal market while maintaining strict controls over external access—through the GDPR and related legislation such as the Data Act and the Data Governance Act. The United States generally prioritizes free cross- border data transfers, but it has strengthened national-security-driven controls by restricting transfers of sensitive data to adversarial countries, including through the enactment of the Protecting Americans’ Data from Foreign Adversaries Act (PADFA) in 2024. China adopted the 2024 Provisions on Promoting and Regulating Cross-Border Data Flows, expanding exemptions from security assessments and standard contractual requirements and thereby improving predictability. Korea comprehensively overhauled its rules on overseas transfers of personal information through the 2023 amendment to the Personal Information Protection Act (PIPA), shifting from a predominantly consent-based structure to a framework that recognizes multiple legal bases, including treaties and international agreements, adequacy decisions by the supervisory authority, and certifications. In parallel, Korea has sought to strengthen the enabling conditions for industrial data use through legislation such as the Data Industry Act and the Industrial Digital Transformation Promotion Act. Going forward, to support AI development, the domestic framework may need to be adjusted to facilitate appropriate data use for AI, and—regarding cross-border transfers—Korea should consider adopting a risk-based approach, while ensuring alignment with domestic law and applying calibrated restrictions where warranted, including on a reciprocity basis.

In the TBT area, the WTO TBT Agreement remains focused on goods and does not directly apply to services or AI technologies. The EU has institutionalized a risk-based approach through the EU AI Act, while the United States continues to lack comprehensive federal regulation despite growing state-level legislative activity. China has introduced AI-related TBT-type regulations by imposing filing and labeling obligations for generative AI and algorithmic services and by issuing numerous national standards. Korea has enacted the Artificial Intelligence Basic Act (scheduled to take effect in 2026), establishing a domestic AI regulatory framework. However, current digital trade disciplines do not yet establish direct, binding obligations specifically tailored to AI-TBT issues, although certain ICT-related provisions (including those involving the use of cryptography) have been introduced in some agreements. Meanwhile, the Korea–EU DTA and the EU–Singapore DTA extend elements traditionally associated with the TBT domain—such as international standardization, mutual recognition of conformity assessment, information exchange, and enhanced transparency—into the digital services space. This suggests that future digital trade agreements may increasingly seek to apply and expand TBT-type disciplines to digital services. Korea, for its part, should participate more proactively in international standard-setting processes and, where appropriate, expand mutual recognition arrangements in order to adapt flexibly to fast-evolving AI technologies and maintain global competitiveness.

From a competition policy perspective, the concentration of data and platform markets has intensified concerns about dominance, and AI development may further strengthen data concentration and platform lock-in structures. Yet current digital trade agreements have not sufficiently developed direct and binding rules to address these concerns. Some agreements—such as the Korea–Singapore DPA and DEPA—include competition-related cooperation provisions centered on information exchange and voluntary cooperation among authorities. Over the medium to long term, attempts could emerge to incorporate obligations on data portability and interoperability into digital trade rules in order to mitigate lock-in effects and promote fair competition; however, given differences in domestic regulatory systems and national interests, it is unlikely that such obligations will be adopted as binding treaty commitments in the near term.

In the intellectual property area, digital trade disciplines often include protections such as prohibitions on requiring the transfer of, or access to, source code (and algorithms) as a condition for market access. With the spread of generative AI, a central issue is whether data use in training may infringe copyrights or other IP rights, and a key focal point is the recognition and scope of a text and data mining (TDM) exception. The EU explicitly provides for TDM exceptions in its copyright framework, and Japan has adopted provisions that broadly allow data use for analysis purposes under its Copyright Act. By contrast, Korea does not have a TDM-specific exception; instead, legality is assessed case-by-case primarily through the “fair use” clause (Copyright Act Article 35-5). From the standpoint of enhancing legal predictability in potential infringement disputes, Korea should consider either (i) introducing a TDM-specific exception or (ii) clarifying, through guidelines and/or legislative refinement, the applicability criteria of the fair use clause to TDM and AI training contexts.

As the importance of AI regulation and international cooperation has grown, recent digital trade agreements have increasingly incorporated AI-related cooperation provisions. For example, the Korea–Singapore DPA and DEPA include dedicated provisions on AI, and also contain separate provisions on data innovation. While the UK–Singapore Digital Economy Agreement (DEA) explicitly provides for joint research and policy cooperation across the AI domain. Looking ahead, rising demands for trust and transparency amid the spread of generative AI may prompt digital trade agreements to address “responsible AI” measures—such as labeling requirements for AI-generated outputs—through cooperation clauses, best-endeavor language, or gradually strengthened commitments. In light of these developments, Korea’s Framework Act on Artificial Intelligence (AI Basic Act) should consider introducing an AI sandbox mechanism, and it would be desirable to issue clear guidance on the scope and implementation of labeling obligations for AI-generated content.

Korea’s current portfolio of digital trade agreements varies considerably across instruments in terms of both the level of disciplines and the degree of bindingness. As Korea expands its engagement in digital trade agreements, it will be important to include core disciplines—such as cross-border data transfers, prohibitions on data localization requirements, and source code protection—as consistently as possible as a common baseline, and to institutionalize them as effective, enforceable obligations in order to reduce firms’ compliance costs arising from rule fragmentation. In addition, meeting the demands of the AI era calls for a balanced digital trade framework that advances openness while maintaining appropriate safeguards. This, in turn, will require a coordinated set of measures—refined risk-based data disciplines, expanded TBT-type disciplines for digital services, and an institutionalized governance framework for AI ethics and safety.

This study examines Japan’s labor shortage, tracing it from cyclical tightness in the early 1970s and the late-1980s/early-1990s bubble to a structural shortfall since the mid-2010s driven by the sustained contraction of the working-age population. Earlier episodes were demand-led and policy-induced (for example, the transition to a 40-hour work week), whereas today’s tightness is demographic in origin and therefore persistent. Chapter 2 details these dynamics and the underlying structural constraints.

To manage this challenge, Japan’s policy response combines mobilization of domestic labor—most notably rising participation by women and older workers—with an expanded intake of foreign workers. The foreign-resident population grew from roughly 2.09 million in 2014 to about 3.59 million in 2024, with rapid increases in Technical Intern Trainees and Specified Skilled Workers. These increases reflect domestic drivers—population aging and acute shortages in care, hospitality, construction, etc.—as well as international forces, including a surge in Asia-centered labor migration and policy shifts. Chapter 3 assesses Japan's policy efforts to engage women and older workers into the labor market, while Chapter 4 reviews the theory, history, and practice of international labor migration in Asia. Chapter 5 disaggregates Japan’s foreign-worker regime into three pillars—high-skilled channels, the Technical Intern Training Program, and the Specified Skilled Worker system—and evaluates their policy design, outcomes, and outstanding issues. Chapter 6 assesses integration through wages and social-insurance coverage as indicators of how well foreign workers are settling into Japanese labor markets and society.

This study sets out the following policy implications for Korea. For older workers, Japan’s experience shows the effectiveness of gradual, sequenced reform—phased extensions of employment guarantees—backed by targeted subsidies, sustained social dialogue, and flexible compliance options for firms. Firm-level transparency and action plans, combined with workplace redesign, childcare provision, and well-targeted grants, have helped lift women’s participation. On foreign workers, Japan and Korea should streamline its fragmented governance and build a more efficient architecture for lower-skilled pathways, with clear skill-progression ladders that link training and language support to advancement in wages and roles. Korea should also better leverage international students by smoothing school-to-work transitions and strengthening settlement support. Finally, Japan and Korea could co-lead rules-based cooperation with major sending countries to stabilize flows and alleviate persistent shortages.

Executive Summary

1. Introduction

2. Model

3. Data and Calibration

4. Assessing Debt Sustainability in the APEC Economies

5. Conclusion

References

Appendix
A. OLG Model and Calibration
B. Dynamics of the Debt-to-GDP Ratio
C. Additional Tables

In this paper, we estimate additional government expenditure used to reduce AI’s existential risk and assess public debt sustainability. Our most important policy-relevant finding is that even under the conservative assumption that government expenditure equals the maximum amount society is willing to sacrifice to mitigate AI risk, and that all such expenditure is financed by issuing sovereign bonds rather than raising taxes, government debt does not necessarily become explosive. Instead, in our benchmark scenario—where the growth-enhancing effect of AI is calibrated to the average of prior studies—the debt ratio remains sustainable for most APEC economies. We also find that, except for Russia, an additional AI-driven growth effect of 3.4–6.1% would suffice for debt financing to remain sustainable for many APEC economies. In particular, for the United States, the required effect is 3.8% or 4.6%, depending on parameter assumptions. For faster growing economies such as China and Korea, the required additional effect is even smaller than for the United States.

Executive Summary

1. Introduction

2. Informal Economy and Composition of ODA in the Philippines

3. Model

4. Macroeconomic Equilibrium

5. Results

6. Conclusion

References

We analyze how the size and composition of official development assistance (ODA) shape aggregate performance and informality in the Philippines using a small open-economy dynamic general equilibrium model with a formal and informal sector. Two main scenarios are considered: (i) an increase in total ODA and (ii) a higher share of tied aid, given a fixed amount of ODA. Both scenarios raise capital, output, and consumption in steady state, but through distinct mechanisms. The first scenario primarily increases demand and appreciates the relative price of informal goods, expanding informality. By contrast, the second scenario expands public capital, crowds in formal investment, lowers the relative price of informal good, and shifts resources toward the formal sector, despite short-run reallocation costs.

Executive Summary

1. Introduction

2. Theoretical Framework

3. Data

4. Methodology

5. Results

6. Discussion

7. Conclusion

References

Appendix

This paper investigates how environmental, social, and governance (ESG) conditions, together with economic factors, shape fertility dynamics in APEC economies. Using World Development Indicators from 1996 to 2021 and assembling more than 1,400 indicators, we predict annual changes in the crude birth rate. Models are trained on non-APEC economies and tested out of sample on APEC economies. Random Forest achieves the lowest RMSE at 0.397, and models that combine ESG and economic variables outperform those relying on economic indicators alone, with RMSE values of 0.271 and 0.298 respectively. SHapley Additive Explanations (SHAP) reveal that environmental factors are the most influential predictors of fertility in APEC, followed by governance, while social factors are smaller in magnitude but show increasing importance over time. Lag analysis indicates short-run effects for social and governance variables at one-year lags and medium- term cumulative effects for environmental variables, peaking around four years. Country-level profiles highlight clear heterogeneity: environmental drivers dominate in China and Russia, governance factors are most important in Korea and the United States, and social influences are stronger in Canada and Japan. The study provides a comprehensive, externally validated, and interpretable framework for fertility prediction, while emphasizing that the analysis remains predictive and associational rather than causal. We regard this as a first step toward more rigorous causal evaluation of the highlighted drivers.

Since the inauguration of Trump’s second term, U.S. trade policy has triggered profound changes in the global trading order. The United States, prioritizing the prevention of illegal immigration and drug trafficking as matters of national security, has implemented stringent trade measures such as the imposition of high tariffs and the renegotiation of bilateral agreements. These policies have amplified uncertainty across the external environment of Latin America, including Mexico and Brazil. The recent U.S. decision to impose a 50 percent retaliatory tariff on Brazilian products starkly illustrates the vulnerability of Latin American trade to policy volatility. Against this backdrop, the upcoming USMCA renegotiation in July 2026 is likely to become another critical variable for the region’s external relations and supply chain configuration.

Despite the rising geopolitical and geoeconomic importance of Latin America, the region remains relatively marginal within Korea’s trade strategy. Yet, the ascent of the Global South, the restructuring of supply chains, and the diversification of trade partners underscore Latin America’s growing strategic value and the urgency for Korea to pursue proactive and long-term policy responses.

In this context, Japan’s experience in Latin America provides meaningful insights for Korea. Japan has consolidated its presence by focusing on traditional manufacturing sectors such as automobiles, machinery, and chemicals, establishing dual hubs in Mexico and Brazil while simultaneously diversifying into markets such as Argentina and Chile. Japanese firms have strengthened localization strategies by responding proactively to policy changes, including Brazil’s “Mover” program and Mexico’s environmental regulations. In the resource sector, Japan has sought stable access to critical minerals such as lithium and copper through close government–business collaboration, supported by financial and policy instruments that helped mitigate risks.

This study investigates Japan’s industry- and period-specific entry cases and government support policies to derive policy implications for Korea’s Latin America strategy. The key recommendations are as follows:
First, strengthen government–business linkages to institutionalize supply chain restructuring support.

Second, emphasize reference-building at the initial stage of entry to establish a foundation for long-term growth.

Third, respond proactively to environmental and regulatory changes to build trust with local governments and turn compliance into a source of competitive advantage.

Fourth, maintain a Brazil–Mexico-centered strategy while expanding into Argentina, Chile, and Colombia to diversify regional risks.

Fifth, explore opportunities for joint ventures with Japan, particularly in strategic sectors such as minerals.

In sum, Japan’s experience highlights essential lessons for Korea to achieve stable and sustainable outcomes in Latin America under conditions of global trade uncertainty. Rather than merely replicating Japan’s approach, Korea should design tailored strategies that reflect the specific characteristics of Korean firms and the diverse demands of Latin American economies.

Recognizing changes in the global economic order and its severe dependency on foreign resources and technology, Europe is greatly invested in strengthening its economic security and further developing its industries. Consecutively, European governments have introduced policies to enhance the competitiveness of their advanced industries. This study identifies the status, strengths and weaknesses of European advanced industries, by examining the present conditions of advanced industries in Europe in terms of trade, R&D expenditure, and human resources, and also comparing the competitiveness in advanced industries with the US and China. Furthermore, it identifies the policy direction of the EU and the UK for advanced industries from the perspectives of promoting innovation and bridging the technological gap, expanding investment, and fostering a level playing environment. This study also reviews the key support policies and regulations for specific sectors in advanced industries, i.e., batteries, semiconductors, AI & digital industry, health & biotech, clean technology, and aerospace.

The following points were confirmed through this research. First, both the EU and the UK recorded trade deficits in items classified as high-tech industries, indicating extensive dependence on foreign sources in these fields. The EU’s R&D expenditure rate also turned out to be less than that of the US and China. While the number of jobs in advanced industries are likely to increase, the EU’s low projection for working-age population in the future indicates that this vacancy is not expected to be filled, unlike in the US and China. These statistics reaffirm the necessity and legitimacy of European policies aimed at enhancing competitiveness in the advanced industry. Second, the EU and the UK are pursuing multifaceted policies to strengthen competitiveness in advanced industries under the overarching goal of climate neutrality. The EU aims to meet more than 40% of its demand for climate-neutral technologies internally by 2030, seeking to reinforce clean-tech production capacity. Initiatives such as Horizon Europe, the Strategic Technologies for Europe Platform (STEP), and the EU Blue Card are being employed to address key challenges and labor and skill shortages. In accordance with its Modern Industrial Strategy (2025), the UK is planning to actively invest in key sectors - automobiles, aerospace, biotech, and clean energy - to stabilize supply chains. In terms of utilization of various funds, the EU is actively promoting Public-Private Partnerships (PPP) projects and investment guarantees via InvestEU, while the UK is significantly increasing investment to strengthen its industrial ecosystem. Furthermore, both the EU and the UK are working to foster fair competition and to expand international cooperation while building internal supply chains and pursuing supply chain diversification. Third, in key strategic industries, both the EU and the UK are simultaneously pursuing large-scale investments and regulatory reforms to drive green and digital transitions along with technological sovereignty. In the batteries sector, the EU is continuously investing in battery manufacturing within Europe, while advancing battery R&D and recycling systems. Meanwhile, the UK is focusing more on technological development and design cooperation. As for the semiconductors sector, the EU is aiming to engage across the entire value chain to address manufacturing vulnerabilities. Considering how the sector is so far dominated by Asian countries, establishing a strong position in batteries manufacturing remains challenging. However, the UK is maintaining a niche market strategy focusing on R&D, design, and IP. In the digital industries sector, such as AI and quantum technology, both the EU and the UK are pioneering regulatory and normative frameworks to challenge US-China technological leadership. Their policies target technological sovereignty and competitiveness through R&D and infrastructure development, with accompanying efforts to implement policies addressing carbon neutrality in the energy-intensive infrastructures. In the health and biotech sectors, the EU policy centers on supply chain stabilization, enhancing internal manufacturing capacities, regulatory streamlining, expanding clinical trial infrastructure, and strengthening the security of critical pharmaceutical supply chains. Clean energy technologies are being promoted through the Net-Zero Industry Act and the Clean Industrial Deal, aimed at strengthening local manufacturing capabilities for eight strategic technologies - including hydrogen, batteries, carbon capture and storage (CCS) - while reducing reliance on non-European countries. Large-scale joint investments and infrastructure development under the IPCEI initiative are actively in process in the hydrogen segment. Meanwhile, the EU maintains a strong position in the aerospace industry sector, mainly thanks to Airbus, while concurrently advancing research on sustainable aviation fuels (SAF) and improving aircraft efficiency. In space, major projects like Galileo and Copernicus are underway, and the EU Space Act has been proposed to secure global standard-setting leadership.

The key implications for Korea’s strategic engagement with the EU and the UK’s advanced industry policies can be summarized in three main points. First, in terms of investment, Korea should strengthen R&D and equipment investment in key sectors such as batteries, semiconductors, AI and quantum technology, while actively leveraging its associate membership in Horizon Europe to enhance networks and market access opportunities. Second, to improve the investment environment, Korea needs to introduce converged regulatory sandboxes and streamline approval procedures, as demonstrated by the EU’s One-Stop Shop model, to foster a competitive industrial ecosystem. Third, for broader cooperation, Korea may consider solidifying its global position in positive technology exposure and standardization processes by participating in public procurement projects and the Korea-EU digital, green, and security partnerships. It should also mitigate supply chain risks by easing upstream dependencies and strategically practicing mid- and downstream network collaboration. Furthermore, it is crucial to proactively respond to ESG regulations (such as the CSDDD) and solidify the foundation for long-term cooperation with Europe through talent exchange and joint research.

Carbon neutrality, as a long-term goal of the international community, can only be achieved through innovation in climate technologies. The scale of climate finance and clean energy investments has continued to grow, with new markets recently emerging through the convergence of climate technologies with other advanced technologies such as artificial intelligence (AI). In this context, this study focuses on the growth and global expansion of startups, which are key economic players capable of driving innovation in climate technologies. In the study, a climate tech startup is defined as an unlisted company established within the past 10 years that has innovative ideas or business models related to technologies contributing to greenhouse gas reduction or climate change adaptation. Based on this definition, the study examines not only the roles of government support in leading countries but also success stories of promising climate tech startups. It also analyzes the ecosystem for climate tech startups and the effectiveness of R&D support programs in Korea, ultimately deriving policy implications for Korea.

Chapter 2 analyzes the key strategies of major countries and promising climate tech startups. Across all the countries reviewed, governments are increasing financial support, encouraging private investment, and supporting networking hubs to connect climate tech startups with each other and other partner companies. In particular, Germany operates large-scale and long-term funds such as the DeepTech & Climate Fund (DTCF), targeting startups at the growth stage rather than those in the early phase. Japan offers incentives, including tax deductions, to encourage collaboration between startups and large corporations as well as investment from large corporations. On the other hand, the UK and the US, where the climate tech markets are largely driven by the private sector, operate specialized institutions for high-risk, high-reward technologies such as ARIA and ARPA-E. The UK promotes the commercialization of climate technologies through regional clusters and innovation networks, including Catapults and Living Labs. The US supports climate tech startups through initiatives like the Energy Program for Innovation Clusters (EPIC), which funds organizations within regional innovation ecosystems. Finland, where both the public and private sector are actively engaged, encourages startups to expand overseas from the early stages of their establishment.

Promising climate tech startups around the world are growing and expanding their businesses into global markets by leveraging various government support programs, attracting private investment, engaging in technology collaborations and partnerships, and capitalizing on the capabilities of their founders. For example, companies such as TBM and Sila Nanotechnologies have successfully utilized a range of government programs from the R&D stage to commercialization for their growth and international expansion. Climeworks and Ascend Elements have secured some of the largest investments in the industry by demonstrating operational success with facilities applying their own technologies and by leveraging government matching funds. Sunfire, Clean Planet, and Coolbrook have achieved successful demonstration and commercialization through strategic partnerships with corporations, universities, and research institutions. Meanwhile, Carbon Clean and 44.01 have developed distinctive business models driven by the leadership and technical expertise of their founders.

Chapter 3 explores the ecosystem and enabling environment for climate tech startups in Korea, along with an analysis of the effectiveness of government R&D programs. Climate tech startups in Korea account for only approximately 5% in terms of both number and total investment scale as of the 2015-2024 period. Over 70% of the total investment was concentrated in the early stages of investment (Series A and below), and the pace of investment attraction remains relatively slow. Notably, government support has led the growth of startups, while the investment shares of venture capital (VC) firms and corporate venture capital (CVC) entities remain comparatively low. Policies and institutional support for climate tech startups primarily focus on financial assistance and the development of a startup ecosystem. Through financial mechanisms such as the Climate Technology Fund, the government aims to stimulate private investment while strengthening the roles of technology demonstration platforms and regional innovation clusters including Green Convergence Clusters. In addition, programs supporting global expansion, such as an initiative to link the Creative Technology Solution (CTS) and Tech Incubator Program for Startup (TIPS), are recently being implemented.

In order to evaluate the effectiveness of the Korean government’s support for climate technology development, the study analyzed the five-year outcomes of R&D support programs implemented between 2016 and 2018. The analysis focused on major climate technologies, including renewable energy, energy efficiency, and hydrogen and ammonia utilization technologies, selected based on their potential for emission reduction and trends in national R&D investment. An AI-based deep learning classification model was used to identify participants in major climate technology R&D support programs. Propensity Score Matching (PSM) and Difference-in-Differences (DID) methods were then used to estimate the impact. The results indicate that the R&D support programs had a positive effect on the financial performance of both startups and small and medium-sized enterprises (SMEs), with a notably stronger and more sustained impact observed in startups compared to SMEs. However, innovation outcomes showed a temporary increase only among SMEs, whereas social outcomes such as job creation were not statistically significant.

Based on these findings, the study suggests policy directions necessary to effectively support climate tech startups in Korea. These include general strategic directions and stage-specific support strategies tailored to the R&D, demonstration, and growth/scale-up phases. Detailed implications for each are discussed below.

Above all, it is crucial to enhance the understanding of climate technologies while ensuring the continuity and consistency of policy frameworks. Achieving this objective requires adopting a balanced and comprehensive perspective on climate technologies. Moreover, it is important to recognize that the perceptions of firms and investors are likely to shift only when there is a credible assurance regarding the long-term sustainability of government policies. The positive impacts of major climate technology R&D programs identified in this study further underscore the importance of sustained support for climate tech startups.

By stage of technology development, the first priority in the R&D phase is to assess whether technology support adequately addresses the integration of different technologies and market demand, and to strengthen the role of universities. Evaluating whether existing policies sufficiently foster technological innovation through convergent approaches is crucial. From a market demand perspective, a detailed analysis should be conducted to identify which technologies are likely to attract significant investment incentives at specific points in time, and this information should be effectively utilized. In addition, measures to enhance incentives for university-based startup activities and collaborative research with external partners should be considered.

Second, in the demonstration phase, it is important to encourage early-stage startups to pursue global expansion and to support regional networks. Given that the Korean economy has high export dependency and a small climate technology market, overcoming these limitations requires strategies that promote consideration of overseas market entry from the initial stage of idea development, similar to the Finnish model. Furthermore, strengthening the role of regional living labs and facilitating the adoption of technologies validated within the region at relatively low cost should also be prioritized.

Finally, in the growth and scale-up phase, it is necessary to expand investment incentives for climate technologies and to support the strengthening of partnerships between firms. It is recommended that tax incentives for climate technology be introduced or enhanced to encourage participation from a diverse range of private investors. In addition, policy mechanisms should be developed to attract investment from well-capitalized firms and corporate venture capital (CVC) entities. For startups seeking global expansion, efforts to facilitate strategic partnerships with local companies in target markets should be further strengthened.