Policy Analyses
RESEARCH
Policy Analyses
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Studies in Comprehensive Regional Strategies Collected Paper II
KIEP Date 2009.12.30
Economic Relations, Energy Industry -
Studies in Comprehensive Regional Strategies Collected Paper I
KIEP Date 2009.12.30
Economic Relations, Energy Industry -
An Evaluation of the Revised Draft Modalities for DDA Agricultural Negotiations and Policy Implications
This study delineates major contents of the 4th amendment in the modality concerning the agricultural sector, which was the most recently released and proposes directions on how to formulate strategic country schedules based on th..
Jin Kyo Suh et al. Date 2009.12.30
Multilateral Negotiations, Trade PolicyDownloadContentSummaryThis study delineates major contents of the 4th amendment in the modality concerning the agricultural sector, which was the most recently released and proposes directions on how to formulate strategic country schedules based on the results after their evaluation.
Ever since agricultural negotiations were included as a theme of the Doha Development Agenda in 2001, modality negotiations on opening markets and reducing agricultural subsidies have continued for 9 years. Even though DDA negotiations in the agricultural sector have proceeded slowly, most people evaluate that it is now time for a conclusion to be drawn, if major countries are willing to settle politically. As mentioned in previous modality amendments, issues in agriculture have been settled already to a considerable degree. Even though differences between developed and developing countries in the core issues such as reducing agricultural subsidies, number and treatment of sensitive and special products and Special Safeguard Mechanism still remain; the differences have been bridged sufficiently for the negotiation and the 4th modality amendment, which was recently released, and revealed specific figures as single ones for subsidies and tariff reductions.
Each member country is to submit its own country schedule if the modality is settled. Therefore, it is necessary for us to prepare Korea's own country schedule to meet the demand for submission.
First, we need to establish categories with as much detail as possible to secure flexibility in providing agricultural subsidies for products for domestic support in the future. In this case, we have detailed a total of 56 products including 8 grains, 17 vegetables, 7 livestock products, 4 other crops, 9 fruits, 4 forest products, 2 mushrooms, 3 flowering plants and 2 medicinal crops.
In case of establishing product-specific AMS limits, it is the best ① to establish with average performance between 1995 and 2000 for rice, barley, corn and rape and ② to establish with performance for the recent 2 years for soy and malting barley and ③ to establish with 10% of the production amount between 1995 and 2000 for the rest of the products if Korea gains its status as a developed country. Also, it is the most reasonable for product-specific AMS limits to be established with 20% of average production amount between 1995 and 2004 if Korea remains a developing country.
Also, the de minimis may not be decided in advance because it is based on a certain ratio of production amount for each product in the said year. However, there is a need to notify if 5 or 10% of the production amount is used for basic ratio for the de minimis.
In addition, it is desirable to select a Blue Box which does not require production(New Blue Box). It is optimum for products with extremely low AMS limits to be established as Blue Box products and for the rest to be established with AMS products in case of establishing Blue Box limits for products. Particularly, rice should be shifted to the New Blue Box, rather than AMS, to increase flexibility in managing AMS.
Finally, it is necessary for the DDA country schedule to be in harmony with tariff reduction schedules in the contracted FTAs. Most major agricultural and livestock products in Korea may be protected to a substantial degree with sensitive and special products proposed in the 4th modality amendment. However, it may cause inefficient border protection, as well as difficulties in import management in case that the tariff reduction schedules in the contracted FTAs are different from those in the WTO. Therefore, it is desirable for tariff lines with small portion of imports from the contracted FTA counterparts to Korea to be independent of tariff reduction schedules, in accordance with DDA agricultural negotiations. However, it is reasonable for tariff lines accounting for most of imports from contracted FTA counterparts to Korea to coincide with the schedules in the contracted FTAs, rather than making independent tariff reduction schedules to accord with DDA agricultural negotiations.
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Study on ways to Utilize Skilled Foreign Workers in Korea Through Policy of Recruiting Foreign Students
A precipitous decline in birth rates is presently forcing Korea to seriously consider increasing the number of foreign employees in its economy. However, inflow of low income laborers would delay extinction of marginal firms, whic..
Yeongkwan Song et al. Date 2009.12.30
Economic Opening, Trade PolicyDownloadContentSummaryA precipitous decline in birth rates is presently forcing Korea to seriously consider increasing the number of foreign employees in its economy. However, inflow of low income laborers would delay extinction of marginal firms, which will not only keep the Korean economy from converting to a high value-added form, but also give rise to many social problems.
In order to prevent such an eventuality, it is imperative that foreign manpower coming into the Korean labor market consist mainly of highly-skilled experts and professionals. Nevertheless, the focus of Korea's policy on foreign workers has hitherto been on unskilled workers, while systematic study of expert foreign workers has so far been lacking. This study is based on the idea that active use of expert workers from overseas is necessary to raise the Korean economy to a new level, and that the most effective way of accomplishing that goal is to link the policy of attracting foreign students with similar plans for expert foreign workers.
In this study, we will learn about the present state of foreign workers in Korea and policies on their employment, and those for attracting foreign students. Based on examples from the US and Japan, a search was conducted for methods on how to facilitate attracting foreign students for work as experts in the Korean labor market. To increase the proportion of foreign experts in the Korean labor market, this study suggests a more flexible visa policy and more job fairs for foreign students in order to draw in elite foreign students to the Korean labor market. Because of various limitations, this study should be considered an initial, preliminary research presenting ways on how foreign students can work comfortably as experts in Korean labor market. Therefore, a more systematic and analytical investigation on the issue would be necessary in the future.
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The World Economy after the Global Economic Crisis: Current Status and its Prospects
The collapse of Lehman Brothers in September 2008 has precipitated the US economic crisis as well as a downfall of the worldwide economy. Many countries have responded immediately to tackle the unprecedented recession by enforcing..
Heungchong KIM et al. Date 2009.12.30
Competition Policy, Economic OutlookDownloadContentSummaryThe collapse of Lehman Brothers in September 2008 has precipitated the US economic crisis as well as a downfall of the worldwide economy. Many countries have responded immediately to tackle the unprecedented recession by enforcing aggressive fiscal stimulus plans, lowering prime interest rates, and implementing unconventional financial measures including buy out of private bonds by central banks', something unthinkable in peacetime.
These policies proved to be quite successful in stopping the 'free fall' of the global economy. The data shows that private consumption and export are picking up, albeit slowly, while the level of employment is still in the doldrums. As for emerging markets, led mainly by China and India, they have shown signs of economic recovery that was stronger than originally expected. Developed economies, after reaching its trough, have shown positive growth compared to the previous quarter during the first and second quarters in 2009. Inferring from the fact that emerging markets are showing higher growth rates than developed countries, we can anticipate the economic trend in 2010, where emerging markets will be in the lead in terms of the recovery in the world economy, although the final signal of economic recovery will come in the form of resurgence of the developed countries.
During the first half of 2010, many of the unconventional financial measures are expected to be withdrawn, while monetary tightening such as a raise in interest rates is expected to be postponed until the second half of 2010, or even 2011. Exit strategies in fiscal policies are expected in the latter half of 2010.
There will be considerable structural change in the world economy after the global economic crisis. Rapidly emerging counties including China, India, Indonesia and Brazil have leaped ahead in the midst of economic crisis, and they will continue their catch‐up process in the future. While the United States will slowly recover from its recession, the economic power of Japan and Europe will likely shrink in the future. Australia may regain its economic significance by joining together with Asia to become Australasia. In the course of structural changes in the world economy, Korea needs to reset its external economic policies. It is especially important to elaborate region‐ or country‐specific economic strategies. As for specifics of said strategies, such measures to enhance economic cooperation with the emerging markets, to strengthen relationship with resource‐rich countries, to apply strategic foreign investment, to diversify FTAs, etc. are some of the more strongly recommended measures.
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Structural Impacts of the Global Financial Crisis and Implications for Trade Policies
In the early 1930s, extensive recession, increase in unemployment and financial crisis caused the uprise of protectionism. Accordingly, world trade collapsed from 3 US$ billion in January 1929 to 1 US$ billion in January 1933. Wha..
June Dong Kim et al. Date 2009.12.30
Financial Crisis, Trade PolicyDownloadContentSummaryIn the early 1930s, extensive recession, increase in unemployment and financial crisis caused the uprise of protectionism. Accordingly, world trade collapsed from 3 US$ billion in January 1929 to 1 US$ billion in January 1933. What explains the variation among countries in succumbing to protectionism? In fact, economic policies connected to foreign exchange rate system are the key determinants of the trade policies in the early 1930s. This study analyzed the evidences that such trade policy measures as import tariffs, import quotas and foreign exchange controls were used as substitutes for devaluation.
In addition, this study compared the impact of the foreign exchange crisis of 1997 on the Korean economy with that of the recent global economic crisis in the context of international trade. Commonly, current account surplus in both periods were due to contraction of the overall volume of trade, especially imports. However, the pattern of terms of trade are different. The terms of trade were exacerbated during the aftermath of the 1997 crisis. However, the terms of trade have been improving recently. This is due to the fall of import prices of raw materials including oil.
Finally, this report studied the effect of the recent global economic crisis on the labor market. After the global economic crisis, unlike the United States which suffered rise of unemployment, there turned out to be no major impact on unemployment rates or labor stability. However, labor stability of women becomes worsened comparatively. This implies that labor market policies need to be focused on specific target groups.
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An Analysis of Micromechanisms for Efficient ODA and Its Policy Implications
As Korea became a member of the Development Assistance Committee(DAC) under the Organisation for Economic Cooperation and Development(OECD) on November 25, 2009, the scale of Official Development Assistance(ODA) is expected to gro..
Kitae Sohn et al. Date 2009.12.30
Economic Development, Economic DevelopmentDownloadContentSummaryAs Korea became a member of the Development Assistance Committee(DAC) under the Organisation for Economic Cooperation and Development(OECD) on November 25, 2009, the scale of Official Development Assistance(ODA) is expected to grow substantially in the near future. This study introduces and analyzes microeconomic mechanisms and derive policy implications to enhance efficiency in ODA, which is gaining importance in scale.
Specifically, this study outlines the major limitations of past aid and five reasons for their failures. Also forwarded by this study are several reasons for provision of aid to four of the major factors of economic growth; namely education, health, institution, and finance. Especially emphasized is a full understanding of microeconomic mechanisms for the efficient implementation of aid. This emphasis is elaborated with two experimental examples for each factor. In addition, the case of an aid project in progress through the World Bank is critiqued to help plan and execute aid in an efficient manner with application of microeconomic mechanisms.
Since the Marshall Plan in the immediate aftermath of WWII marked the real beginning of aid, most of the aids have actually revealed serious limitations in promoting economic growth in developing countries or have even become impediments to growth. However, this should not lead us to conclude that aid is unnecessary. In fact, more aid might be needed to stimulate economic growth. This study does not deemphasize aid itself. Instead, it sheds light on problems inherent in implementing aid and tries to address the problems.
This study argues that the lack of a strong incentive for the efficient use of aid money, on the part of both donors and recipients, is the main and outstanding cause of failure of most aid. At present, a connection appears to be weak between results and rewards/punishments for policy makers for the provision of aid. The policy makers face few punishments even when living standards of the poor are not improved. Thus designing proper mechanisms to strengthen an incentive for the efficient use of aid money is absolutely necessary to improve the living standards of the poor.
It is suggested that the policy makers should give greater consideration to unique characteristics and environments facing the designated beneficiaries and focus on gradual improvement of human capital and social infrastructure. This would allow for greater efficiency in improving the living standards of the beneficiaries, which can be achieved through a system of incentives based on market logic.
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Analysis on the Effects of Logistics Efficiency on Trade Flows in East Asian Countries
This paper analyzes how logistics efficiency affects trade flows in East Asian countries. Based on a gravity regression framework, the analysis suggests that measures to improve logistics efficiency have the positive effects in ex..
Ho-Kyung Bang Date 2009.12.30
Economic Cooperation, Trade PolicyDownloadContentSummaryThis paper analyzes how logistics efficiency affects trade flows in East Asian countries. Based on a gravity regression framework, the analysis suggests that measures to improve logistics efficiency have the positive effects in expanding East Asian country trade.
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The Economic Effects of Potential Outcome of the Doha Round and its Implications for Korea's Stance
The multilateral negotiation engaged in Doha in November 2001 has reached a very crucial point. Draft modalities have been finalized by the chairmen of the agriculture and Non agricultural market access (NAMA) committees. However,..
Jin Kyo Suh et al. Date 2009.12.30
Multilateral Negotiations, Trade PolicyDownloadContentSummaryThe multilateral negotiation engaged in Doha in November 2001 has reached a very crucial point. Draft modalities have been finalized by the chairmen of the agriculture and Non agricultural market access (NAMA) committees. However, the multilateral agreement, and the ultimate fine tuning of the proposals missed target of reaching a consensus. Still negotiations resumed and helped removing some stumbling blocks.In the stage of political lack of will among the main actors of a possible deal, it is utmost importance of precisely quantify the potential gains associated with the completion of the Round and how these gains are shared among countries.The study used here to assess the consequences of the negotiations are highly technical and complex, pointing to the imagination of the negotiators to find a politically acceptable deal. The state of the art lies in the measurement of border protection at the most detailed level affordable, and in the computation of actual liberalization resulting from a tariff-cutting formula. Bound and applied duties (whether ad valorem, specific, mixed or compound) have to be measured at the HS-6 digit product level.Using computable general equilibrium model of the world economy (GTAP), we simulate the impacts of the December 2008 drafts circulated by the WTO. The most important finding at the aggregate, global level is that any of the plausible trade scenarios will produce only modest gains, a one-time increase in world real income of $58 to $136 billion. This represents an increase of 0.1~0.3 percent of current global gross domestic product (GDP). The limited nature of the gains from the Doha Round goes far in explaining the lack of urgency demonstrated by WTO negotiators.Given relatively low gains, the adjustment costs to which countries expose themselves when they change trade policies may loom larger than in the past. The modest overall gains would have quite different economic effects on different countries and regions. The biggest gainer is both China and Korea with gains ranging from 1.1 to 1.4 percent of GDP under different scenarios. More than half of these gains would be reaped within 5 years of implementation only.In conclusion the crunch has come: 2011 is a real dead line. If Doha fails, it seems inevitable that the WTO's slow decline will accelerate. If it succeeds, then victory will have been snatched from the jaws of defeat. Either way, serious thought needs to be given to future methods of negotiation. In these process, Korea needs to participate actively in the negotiation, particularly with a possible compromise on essential issues such as SSM and sectorals. -
Korean FX Rates Analysis During the Financial Crisis: Effects of Foreign Bond Investments and FX Hedged Foreign Fund
The global financial crisis, triggered by the subprime mortgage crisis in 2007, has put the Korean economy into the recession with financial market turmoil. This paper examines the role of foreigner's investment in bonds and the F..
In Huh et al. Date 2009.12.30
Financial Policy, Financial SystemDownloadContentSummaryThe global financial crisis, triggered by the subprime mortgage crisis in 2007, has put the Korean economy into the recession with financial market turmoil. This paper examines the role of foreigner's investment in bonds and the FX-hedged foreign equity fund as driving forces of KRW-USD exchange rate changes. Our empirical analysis using VAR (Vector Autoregressive) model reveals that the increases of both interest-rate arbitrage opportunity and the net asset value of foreign funds have negative relations with KRW-USD exchange rate, and vice versa. According to impulse responses, the two reasons account for about 40% of the exchange rate variations between 2008 and 2009. This significant result suggests policy implications that the authority's intervention in currency swap market and appropriate regulations on the portion of FX hedged foreign fund help stabilizing Korean FX market.