This policy paper aims to analyze the competitiveness of Japanese manufacturing sector since the 1990s, focusing on the crisis of Japanese electronic sector, which is often called as the Galápagos Syndrome. Based on the analysis, we derive various implications for the Korean manufacturers and the government from the Japanese experiences.
Chapter two reviews the factors that affected the competitiveness of Japanese manufacturing sector, for example, the rising of Asian emerging markets, the appreciation of Yen since Plaza accord of 1985, and the digitalization and standardization of manufacturing technology.
Chapter three analyzes the competitiveness of Japanese manufacturing sector since the 1990s using indexes such as Total Factor Productivity (TFP), Intra-Industry Trade Index (IIT), and Value Added Rate. According to the TFP measurement, It is clear that  the productivity of Japanese manufacturing sector has fallen apparently from 1995. And, according to IIT measurement, the export competitiveness has  weakened in electronics, general machinery, metal and textile industry. In particular, the Japanese manufacturing sector has lost its competitiveness by the ratio of value-added to sales amount which has fallen even during the depreciation of Yen in the 2000s.
Chapter four examines the crisis of Japanese manufacturing sector from the perspective of business management (in Japanese, Monozukuri). We are emphasizing that modularization of manufacturing architecture has deprived Japanese electronic manufacturing firms of comparative advantages based on integral manufacturing technology. Moreover, the earthquake in the northeastern Japan in March 2011 has revealed the fragility of Japanese manufacturer’s supply chain, which used to be considered as one of the major strong points.
Chapter five discusses the strategies and the polices of the  Japanese government to strengthen the manufacturing sector. We are focusing on how the Japanese government supported the R&D sector with R&D Partnership and fostered the cooperation between the government, the industry and the academia. The Japanese government has tried to increase R&D expenditure, stabilize employment, and assist growth of ecological enterprises and small businesses. However, the Japanese government's polices have been ineffective in that its R&D expenditure has not contributed much to the profit growth of the enterprises, nor has the R&D Partnership induced active participation from many firms, not to speak of the unachieved innovation outcomes from the cooperation between the government, the industry, and the academia.
Chapter six discusses the lessons and the policy implications we could obtain from the Japanese experiences to strengthen the Korean manufacturing sector, so that the Korean manufacturing firms would not repeat the Japanese electronic manufacturer’s experiences. The Korean government should support the growth of the higher value-added industry such as parts and materials manufacturing sectors. Moreover, it is necessary for the Korean manufacturing firms to be more active in business cooperation with their Japanese counterparts, especially when expanding to the new emerging Asian markets. Finally, the Korean government should further actively engage in the R&D investment of the small businesses in basic science technology. In this respect, the Japanese R&D partnership and cooperation between the government, the industry, and the academia could be a good example for the Korean government.

The Generalized System of Preferences (GSP) was established to promote the exports of developing countries to developed countries in order to support their economic growth and development. The European Community (EC) was the first to implement their GSP program in 1971, and Japan and the U.S. introduced their GSP programs in 1971 and 1976, respectively.
The GSP focused exclusively on creating incentives for access to larger markets of developed countries. In fact, Korea was one of the beneficiaries of the GSP. In the 1980s, Korea had graduated from the trade preference programs due to its remarkable progress in terms of economic development and improvements in trade competitiveness. Considering Korea’s achievements, including Korea becoming the chair and host of the G-20 summit, and also became the first country in the world that emerged from the status of aid beneficiary to become a donor, it is the right time for Korea to consider the introduction of a GSP scheme.
The purpose of this study is to discuss the strategic approaches for the introduction of the GSP scheme into Korea. In doing so, existing GSP programs of major developed countries and Korea’s relations with developing countries are explored. Also, the economic effects of the introduction of the GSP on Korea and other developing countries are analyzed.
Firstly, Chapter II reviews and compares the GSP programs of the major industrialized countries such as the U.S., Canada, EU, and Japan. Notice that the GSP program should be unconditional and create no discrimination between developing countries. However, it turns out that existing GSP programs become more complex in terms of country- eligibility and product-eligibility requirements, graduation rules, rules of origin, and so on. That means the effects of GSP are actually debatable. Nonetheless, it appears that the GSP scheme influences the export performance of developing countries in a significant and positive way, facilitating development and poverty reduction. In this sense, there is an increasing need to maintain and extend preferential market access through the GSP to developing countries.
Recently, the EU published a proposal to revise the current GSP scheme. The draft proposal aims to raise the effectiveness of the GSP by focusing GSP preferences on countries most in need. The major changes would involve reducing GSP beneficiary countries and refining graduation rules, GSP+ related procedures and criteria, and making rules of origin less complex.
Lessons can be drawn for Korea from these changes and also experiences of other countries, that it is more important to establish and operate the GSP scheme in a way that helps developing countries develop their economies than just to grant the tariff preferences under GSP. In other words, it is crucial to operate the GSP preferences in accordance with the original intent and purpose of the GSP. However, the lack of reciprocity in the GSP program could harm domestic producers who compete with imports that receive preferential treatment under the GSP. Thus, it is necessary to have a safeguard mechanism to protect the interests of domestic producers and workers as well as a review mechanism to operate the GSP treatments properly.
Chapter III covers Korea’s relations with developing countries, which was explored by analyzing Korea’s tariff phase-out programs under its preferential trade agreements and its importing structure vis-a-vis developing countries. Korea’s preferential agreements with developing countries include FTAs with ASEAN countries and Chile, the Asia Pacific Trade Agreement(APTA), and the Global System of Trade Preferences (GSTP). Most importantly, the new round of APTA and GSTP agreements have not yet been initiated. But increases in their existing level of concession under APTA and GSTP will limit the scope of GSP treatments in Korea. In particular, the issues related to ‘redundancy in preferences’ and ‘preference erosion’ should be carefully considered when introducing the GSP scheme into Korea.
Chapter IV then examines the economic effects of the GSP on Korea and beneficiary countries. Clearly, the GSP program will affect trade flows and production patterns in both Korea and developing countries. However, it is not clear whether Korea and beneficiary countries would benefit from the introduction of GSP into Korea because GSP tariff cuts could result in not only efficiency gains but also welfare losses. In this regard, we use a CGE model to see how real GDP and welfare will be affected by tariff preferences under the GSP. The results show that economic benefits are expected in both Korea and developing countries, but the scale of the economic impact depends on the range of beneficiary countries which receive benefits from the GSP and the degree of openness in sensitive sectors. This suggests that Korea needs to consider the introduction of GSP in the strategic context.
Chapter V concludes by discussing the policy directions for the key components of the GSP program such as the determination of country-eligibility and product-eligibility requirements, graduation rules, rules of origin and so on. This study proposes a gradual implementation of the GSP program as an effective and feasible approach for introducing GSP schemes into Korea. In the mid to long term perspective, Korea needs to make sure that its GSP scheme to cover the wide range of beneficiary countries and extend preferential market access to sensitive products.

 

China's financial market has grown fast since the beginning of the 2000s although it is obviously less developed compared with its real sector yet. As measured in the ratio of total financial asset to GDP as of 2009, China is about 70% as developed as the U.S. in financial deepness. While the indirect financing via banks still accounts for three fourths of total financing in China, the direct financing through capital market is in the early phase of development. The non-performing loan problem and the financial weakness of commercial banks, which were mentioned as major lingering concerns in China's finance, have been improved due to the financial support from its government in the early 2000s. Despite this quantitative growth and better statistics, there are still many obstacles to further financial development in China. They include strong government intervention in finance such as state ownership of banks and interest rate control, low financial competitiveness and underdevelopment of capital market and investment banking industry. Therefore, it is hard to predict that China's financial institutions would be competitive enough to lead the global financial market in the foreseeable future. The recent global financial crisis and thereafter China's massive stimulus measures created additional risks in its financial sector.
This low competitiveness of banks and extensive financial interventions by government work as impediments to greater flexibility of exchange rate and more liberalized capital flows in China. It is theoretically proper to sequence policies in the order of domestic financial reform including interest rate liberalization, greater flexibility of exchange rate, capital account liberalization, and currency internationalization. Currently China's policies, however, are under way in a mixed order. After the global financial crisis renminbi internationalization policy started to be driven with priority. Although renminbi internationalization is the ultimate goal of China, it would face difficulties in making further progress without prior measures for financial openness, which in turn calls for exchange rate flexibility.
This logic leads to the prediction that China will increase its exchange rate flexibility sooner or later. Such a decision possibly would be prompted by the recognition that the flexibility is a crucial precondition for the ultimate goal, namely internationalized renminbi. Greater flexibility of exchange rate would be also beneficial to China because it needs to deal with both appreciation pressure from outside and inflation pressure from inside. Moreover, China is likely to make progress in capital account liberalization, albeit slow and limited. In particular, it may loosen regulations on portfolio investment including larger investment ceilings, while maintaining strict restrictions on short-term capital flows and financial derivatives. However, it would take long time to achieve full-fledged convertibility of renminbi because China has a long way to go to fulfill its preconditions such as domestic financial reform. In conclusion China is very likely to push forward internal financial reform, greater exchange rate flexibility, capital account liberalization, and currency internationalization in a gradual manner simultaneously rather than in a relevant order.

As Korea-India economic cooperation has been gaining momentum in recent years with increasing institutionalization of relevant mechanisms, there is a growing need to further promote the entry of Korean companies into the Indian market and enhance the synergy in economic cooperation between Korea and India. Yet, vast differences in the investment environment and disparities across states present both opportunities and risks, which in turn calls for a strategic approach based on a proper understanding of the growth patterns of different states. It is in this context that the current study seeks to project long-term growth rates and patterns of Indian states, and examine policy implications accordingly.
The present study employs the growth accounting model as a tool to estimate the growth patterns and long-term growth rates at the state level. To begin with, the study categorizes Indian states into fast-growing, average, slow-growing states. The fastest growing states include Gujarat and Maharashtra; average states are Kerala and Karnataka; and Bihar and Assam are among the slow-growing states. A cross-examination of the past state-level growth patterns based on the factors of production and the total factor productivity revealed that states in which the contribution of total factor productivity has increased substantially saw an equally substantial rise in the GDP growth rate. On the other hand, in other states where the contribution of total factor productivity has declined, the GDP growth rate has fallen short of the national average, which indicates that Indian states' growth rate is determined by factors other than the increase in capital and labor. In addition, states are classified based on long-term growth rate projections into fast-growing/high-income, fast-growing/low-income, slow- growing/high-income, and slow-growing/low-income states: Fast- growing/ high- income states are Gujarat and Maharashtra; fast-growing/low-income states include Orissa; and slow-growing/ low-income states include Bihar and Madhya Pradesh.
While effecting changes in the factors of production and the total factor productivity had little impact on the economic conditions, provided the investment rate is changed, it increased the disparities in the GDP growth rate and GDP per capita. On the other hand, in accordance with the neoclassical economic growth theory that the growth rate in the total factor productivity increases rapidly in a backward state, changing the total factor productivity yielded significant changes in the growth rate, income levels, and growth patterns of states. Maharashtra, Tamil Nadu, Kerala, and Gujarat; which were initially classified as fast-growing/ high-income states, were regrouped as slow-growing/ high-income states; slow-growing/low-income states such as Karnataka, Madhya Pradesh, Andhra Pradesh, Uttar Pradesh, Bihar, Rajasthan, and Assam moved to the fast-growing/ high-income group.
A comparison of the nominal GDP of fifteen states of India with that of other countries, provided that the growth rate in total factor productivity will continue in the future, indicated that the nominal GDP of Maharashtra, Gujarat, and Tamil Nadu will surpass that of Poland, Turkey, and Thailand by 2026. Notably, the nominal GDP of Maharashtra is projected to exceed that of Korea by then. In addition, the projections of the nominal GDP per capita revealed that the figures for Maharashtra and Gujarat will be similar to that of Mexico, while Tamil Nadu, Kerala, and Haryana will be on par with the Republic of South Africa by 2026.
Based on the analysis of the growth patterns of Indian states, the following policy implications can be provided. First, forward-looking and more focused strategies need to be formulated with a particular focus on the states of Maharashtra and Gujarat which are to develop into leading economic hubs in India. At the same time, an approach geared toward domestic demand rather than manufacturing bases for exports is needed, taking into account unique attributes and medium/long-term development plans of Indian states. Second, a close watch should be kept over such states following closely behind the fast-growing/high-income group as Punjab, Orissa, Karnataka, and Madhya Pradesh; and accordingly, appropriate strategies targeting those states should be prepared. On the other hand, as for slow-growing/low-income states such as Bihar which carry high-growth opportunities as well as risks, close monitoring should be undertaken on their policy and business environments. For these states, an incremental strategy should be adopted for the medium/long-term, while targeting niche areas in the states in the near term.
As Indian states’ economic growth accelerates and income levels rise at a pace much faster than developed countries and other emerging economies, the industries and consumption demand will likely keep up a similar pace of change. In particular, infrastructure projects are likely to expand substantially, and as such, there is a need to capitalize on the immense demand for infrastructure development. Furthermore, it must be also noted that the consumption pattern will change fast with rising income levels in Indian states. Therefore, efforts are needed to respond flexibly to the changing trends and patterns of economic growth in Indian states, while paying particular attention to the metropolitan cities of India.
 

 

Subsidies are financial contributions by the government or public bodies which confer benefits to their recipients. China has provided various grants, preferential loans, tax incentives and other forms of subsidies to promote the production and export performance of its industries. With its accession to the World Trade Organization (WTO) in 2001, China has fallen under the regulatory framework of the multilateral trading system. As a result, China’s industrial policy is subject to both WTO’s general subsidy disciplines, and specific commitments and tailor-made provisions laid down in the accession package. The latter include a partial recognition of the developing country status, special provisions on Chinese state-owned enterprises, transparency obligations, the use of out-of-country benchmark prices in countervailing investigations against Chinese products and others.
Composed of six chapters, this study examines the state of play on China’s subsidization practice and counteractions taken by its major trading partners, as well as to explore possible implications for Korea. In particular, Chapter II considers the application of WTO rules to China’s subsidies. Chapter III shows major trends in the use of subsidies by industrial sectors on the basis of China’s declared policies, WTO notifications and relevant laws and regulations. Chapter IV examines how Chinese subsides have been addressed in the WTO’s political and judicial “control” mechanisms, such as the Transitional Review Mechanism, the Trade Policy Review Mechanism and dispute settlement procedures. Chapter V discusses the practice of individual countries - basically the United States and Canada - of countervailing Chinese subsidies. Finally, Chapter VI considers what lessons and implications Korea can draw from other countries’ anti-subsidy measures against China.
Over the past ten years, China has been criticized in WTO political forums for the lack of transparency in its subsidization practice. In the judicial track, Chinese subsidies have been complained of in 9 out of 23 dispute cases initiated against China as of November 2011. Most of them centered on prohibited subsidies and ended with mutually agreed solutions. The countervail mechanism vis-a-vis China has been used mainly by developed countries such as the United States, Canada, Australia, and the European Union of whom Canada was the very first user.
Unlike these and some other countries, Korea has so far maintained a passive stance toward Chinese subsidies. It has usually kept silent in WTO forums, never resorted to the WTO dispute settlement or countervailing mechanism against China. However, given the increasing role of China as a trading partner, Korea should first of all strengthen its monitoring capacity with respect to both China’s subsidization policy and other countries’ anti-subsidy measures. Countervailing investigations and WTO dispute cases are initiated by the government normally upon the requests of domestic industries. In choosing between these two tracks, the government should weigh all the pros and cons in terms of the time consumption, costs, the actual effect of remedies etc. and then decide which track to resort to. On the other hand, the case study on anti-subsidy measures demonstrates that it is important for the Korean government and companies to minimize the possibility of being targeted by such measures and, in any event, to be well prepared for such challenges.

 

For the past 20 years, APEC has worked on a wide range of Regional Economic Integration (REI) activities with sustained efforts for establishing the Asia-Pacific Economic Community. In order to follow up Leaders’ instructions to implement the REI agenda, various activities related to trade and investment including Rules of Origin (ROO) have been addressed. More specifically, APEC-wide efforts for harmonizing ROOs are being made, aiming to minimize administrative costs caused by complex ROOs. In this regard, the purpose of this research is to provide policy makers and academics with solid and tangible policy implications and recommendations based on qualitative and quantitative analysis on APEC’s ROO activities. To serve this purpose, this research first examines characteristics of both preferential and non-preferential ROOs. It then endeavors to explore ways to enhance the trade creation effect of FTAs/RTAs, while minimizing trade cost, when we employ ROOs as policy tools. Quantitative and qualitative analyses are attempted to derive policy implications and suggestions.
Chapter 2 provides a general outline and characteristics of ROO followed by review/examination of non-preferential Harmonized Rules of Origin (HRO) and preferential ROOs including ASEAN, EU, NAFTA, MERCOSUR and TPP. Major findings in this chapter can be summarized as follows: HRO which represents non-preferential ROO, features consistency with general rules. Meanwhile, preferential ROOs are complex with a number of exceptions, that is, product-specific rules. However, the recent preferential ROOs have fewer exceptions and reinforce general rules with regional value content. In light of the pros and cons of the non-preferential and preferential ROOs, we draw the implication for APEC ROO. A more consistent and coherent general rules with fewer exceptions should be established by making the best use of de minims and cumulation.
Chapter 3 presents APEC-wide discussion and activities relevant to ROO and provides theoretical basis for the need to harmonize and simplify ROO. ROO was included in the REI agenda since the mid-1990s. However, it was not regarded as an independent policy tool for promoting free and open trade. Compendium of Rules of Origin published in 1997 containing preferential trade initiatives and non-preferential ROOs of 16 APEC economies can be regarded as one of APEC’s several earlier achievements in ROO. Since the end of the 1990s, FTAs/RTAs in the region have increased sharply and the region deteriorated into a spaghetti bowl situation. It entailed high administrative costs for application of preferential tariffs, which hampered economic benefits of free trade. In 2008, as a part of REI activities, APEC has agreed on a working plan for the harmonization of ROOs and the simplification of documents and customs procedures. APEC has developed Model Measures for RTAs and FTAs to encourage a coherent and consistent approach to the design and content of such agreements. ROO-related activities and analytical studies have been undertaken to promote greater convergence and build capacity. In February 2009, APEC Senior Officials identified Rules of Origin as a priority agenda for 2009, and tasked the Committee of Trade and Investment (CTI) and its various sub-fora to look into making ROOs more business-friendly. They sought to undertake work related to harmonization, cumulation and simplification of documentation and procedures. In 2009, Leaders instructed that Pathfinder Initiative on Self-Certification of Origin be set to reduce administration costs and capacity-building projects be promoted to induce more economies’ to participate. Also, they instructed that global supply chain activities be conducted aimed at 10% improvement by 2015. In 2011, APEC Leaders instructed to enhance SMEs’ participation in global supply chains. In terms of reducing costs at the border, behind the border, and cross the border, ROO is closely linked with next generation trade and investment issues, trade transaction costs, supply chain, SMEs, and ease of doing business. In this regard, APEC-wide activities and efforts will give greater focus to the simplification and harmonization of ROOs.
Chapter 4 examines the impact of ROOs on trade through theoretical analysis, case studies, and test them empirically by utilizing the gravity model. To reduce the trade diversion effect caused by spaghetti bowl effects, regime-wide ROOs, such as cumulation, de minimis and certification, are examined as policy tools. Analysis on bilateral/diagonal/full cumulation is made to estimate the economic impact. The empirical analysis reveals that full cumulation creates 18.8% increase in trade, followed by 5.53% increase by diagonal cumulation and 3% increase by bilateral cumulation. De minimis results in a 6.8% increase in trade. However, the economic efficiency of a system of self-certification compared to public-certification remain unproved in statistical terms. This may imply that, in practice, self-certification requires more burdensome documentation and additional procedures.
Building on the major quantitative as well as qualitative findings, Chapter 5 delineates several principles/directions and policy recommendations for effective promotion of APEC’s ROO activities. First, standardization and simplification of ROOs should be attained to promote greater utilization of FTAs/RTAs and create a business-friendly policy environment. The recently established WebTR provides customs procedures, tariffs, and ROO-related information. Its function should be developed further and made more user-friendly with respect to APEC REI activities. For instance, it should be a diversified database that can guide APEC business specifically towards understanding the complicated ROOs of various FTAs/RTAs in APEC. Its role as a network hub needs to be strengthened further for it to contribute to the reduction of administration costs and time, and promotion of transparency and predictability of APEC ROOs. Second, adoption of the Pan-Asian Pacific Cumulation System (PAPCS) should be considered a pathway to achieving an FTAAP. As proven in the quantitative analysis, diagonal or full cumulation lead to increased trade. Hard work is required to identify economic impacts and challenges of diagonal and full cumulation through policy dialogue and analytical study. Also, a study for best practices should be undertaken on a consistent basis. Third, further efforts to promote regulatory cooperation and convergence should be made. Relevant regulations should be realigned for simplification and harmonization of APEC ROOs. The application of ROOs requires both strictness and flexibility in laws and regulations of individual economies. The self-certification procedures greatly differ from economy to economy - rigidity and heterogeneity of laws and regulations undermines the benefits of self-certification of ROOs. To facilitate better application, ‘Simplification of Documents and Procedures Relating to ROOs’ should be developed and advanced through regulatory cooperation and convergence. It will enable a more efficient process of self-certification of ROOs. Finally, all the work of simplification and harmonization of ROOs covers not only regulations but also cross-cutting and trade facilitation issues. For APEC’s establishment as a single market, more APEC economies should participate in discussions for a single cumulation zone and APEC-wide capacity building programs for better utilization of ROOs, and APEC economic integration. Since 2010, Korea proposed and conducted the Regional Economic Integration Capacity Building Needs Initiative (REI CBNI), aimed at expanding opportunities for participation in APEC REI projects including an FTAAP. The REI CBNI will be in operation for 5 years starting in 2012. Under this initiative, tailor-made programs including ROO capacity building will be developed and implemented. Supply of expertise and financial resources are important factors for a successful REI CBNI. For expertise and financial resources, utilization of Official Development Assistance (ODA) or APEC-wide business participation under Corporate Social Responsibility (CSR) can be considered.

 

 

Many countries/regions including the US, the European Union, and China have implemented a wide variety of protectionist measures since 2008 when the global economic crisis occurred. As major economies are afraid of the devastating impacts of competitive protectionism, they have been warning against the strengthened protectionism at the G20 and the WTO meetings.
When we review the tariff rates from 1996 to 2010, the applied tariff rates dropped from 10.5% on average in 1996 to 7.0% level since 2006. However, it turned out that the number of trade remedy measures including the anti-dumping duties, safeguards, and countervailing duties increased rapidly since the late 1990s. In addition, we have also seen non-tariff measures including TBTs and SPSs becoming more widespread in recent years.
This study investigates the level of protection in 2000 and 2010 implementing the two-stage approach suggested by Helpman et al. (2008) and Kee et al. (2009) to address problems involving endogeneity and sample selection. The empirical results reveal that the level of protection dropped from 19.7% in 2000 to 11.0% in 2010. It implies that the level of protection decreased mainly due to the Uruguay Round concessions and the spreading Free Trade Agreements.
When we analyze the economic costs of protectionism by types, it turned out that the trade remedy measures have a negative effect on trade, which is statistically significant. New types of non-tariff measures including TBTs and SPSs, which have been spreading rapidly all over the world, turned out to have depressing effects on trade. However, older types of non-tariff measures including price and quantity measures which have been kept under effective control by the WTO system, turned out to have mixed effects.
This study also investigates the impacts of protectionism on employment in the Korean manufacturing industries between 1991 and 2006, employing the GMM (the Arrellano-Bond dynamic panel estimation technique) system to account for potential endogeneity arising from the inclusion of the lagged dependent variable into explanatory variables. It finds that the effects of protectionism on employment depend on the wage level. In particular, protection measures such as high tariffs result in reduction of employment in industries paying higher wages. We also find that tariffs in Korean manufacturing industries have significant impact on employment of blue collar workers, whereas its impacts on the white collar workforce are not significant.

 

Since WTO has been established in 1995, trade liberalization has led multilateral and interregional corporation to reduce the world’s average tariff rates by an active and robust movement. Hence recently the key issue in the field of international trade is moving from tariff barriers to no-tariff barriers as the latter is not transparent, complicated and not estimated virtually unlike the former. Especially, the importance of Technical Barriers to Trade (TBT) among various non tariff barriers is gradually increasing as many developed and developing countries have started to adopt many technical regulations and relevant systems since 2004.
Analyzing the TBT notifications that have been reported to WTO, the number of the member country’s new technical regulation has constantly increased. Especially the TBT notifications have drastically increased since 2004 and hit the peak in 2009. This recent trend is mainly from the increased intervention of developing country. In addition, the recent increase in the number of specific trade concerns (STCs) implies that new technical regulations are more and more likely to be trade barriers to other trading partners.
TBTs in the U.S, EU, China, and Japan which are Korea’s major trading partners have also been increased since 2004. By industry, the increased reports are shown under mainly rubber and chemical, general machinery and electrical equipment among these countries. These sectors have the high percentage of bilateral trade between Korea and them. By objective, there are many TBT notifications for environmental protection among these countries. A technical regulation for environmental protection is more likely to be adapted by each country’s subjective criterion. It is remarkable that these countries record top rankings of the country list which is brought STCs by other trading partners.
Theoretically, the economic effects of TBT can be various and different based on its type. First, viewing TBT from producer and consumer’s perspective, it can be classified by production cost and consumer utility. The TBT which increases just production cost is more likely to be trade barriers to foreign exporters, especially when it applies to only foreigners unequally. On the other hand, The TBT which increases consumer utility renders a consumer’s intention for expenditure. In this case, exporters with high technology are more likely to gain higher profit due to the TBT so that it promotes international trade.
Second, depending on the norms of TBT level it can be divided into horizontal and vertical one. The vertical TBT can be defined as the intensity of rigor on regulation, while the horizontal one exists within the cultural and geographical difference. The technical regulation for gas emission can be an example of the former, while the standard voltage for home appliances can be of the latter. It is clear that the vertical TBT is more likely to be barriers to trade. However, domestic producers can also use the horizontal TBT as useful instrument to protect from import penetration although the horizontal TBT is naturally formed from the demand side.
Theoretical analysis on TBT with its economic effects is supported by empirical results from previous researches. Previous researches result in opposite side of TBT’s economic effects depending on national, industrial and periodical property. The opposite results are influenced by the trade-off relationship between an increase in adjustment cost and a decrease in transaction cost and/or demand-stimulating effects. Again, the trade-off relationship can be differentiated by national, industrial, periodical properties.
Based on the theoretical analysis and previous researches, this paper empirically tests the effects of TBT on bilateral trade among Korea and its major trading partners, using the WTO TBT IMS and the UN COMTRADE datasets over the period 1995-2009. The empirical results show that overall there are negative effects of TBT on trade between Korea and its major trading partners. However, these negative effects persisted just in the short run generally: in the long run, the negative effects are disappeared or even transferred to positive effects in some situation. By country, the negative effects persisted longer in Korea’s bilateral trade with EU and Japan. By industry, the negative effects of TBT on exports are less prominent in sectors with comparative advantage and/or higher international competition, but more prominent in high technical-intensive sectors. These various effects of TBT on trade can be explained by the trade-off relationship which we mentioned above.

 

World has grown so rapidly and the amount reached to $ 27.2 trillion. This is not only because of the multilateral or regional efforts toward free trade but because of global production networks and global outsourcing.
Korea’s trade volume continues to grow, and achieve $ 1 trillion and becomes the world’s ninth country in 2011. About 50% of total exports and 70% of total imports are intermediate goods trade. Korea’s intermediate goods trade is closely related to changes in division of production structure with China, Japan, ASEAN, and other Asian regions.
Various researches have been conducted about total trade, while comprehensive studies on Korea’s intermediate goods trade is very rare despite of its importance and weight. The purposes of this study is to increase the overall understanding on trade in intermediate goods and to present relevant policy implications by analyzing the trends, current situations, the determinants, input-output structure, and productivity spillover effects of Korea’s intermediate goods trade.
According to the results of determinants for World’s intermediate goods trade, not only traditional explanatory variables but comparative advantage variables and institutional variables turn out to be significant determinants. Moreover, geographic factors, customs duties, shipping costs, and comparative advantage  factors play more important role in intermediate goods trade than final goods trade. We found similar results for Korea’s trade data. Korea mainly exports capital-intensive goods and relation-specific goods. Also Korea imports capital intensive goods from capital abundant countries and does relation-specific goods from countries with high levels of legal and institutional system.
We analyze input structure of imported intermediate in Korea’s industrial production by using industry linkage analysis. For analysis period (from 2000 to 2009), the share of imported intermediate is increasing. On average, each industry requires imported intermediate by 0.03 billion won in order to produce final goods by 0.1 billion won. More imported intermediates are used to produce goods for exporting than for domestic consumption or investment.
We study the productivity effects and spillover path of imported intermediates by using a computable general equilibrium (CGE) model considering endogenous international technology spillover effects. The effects of imported intermediate on domestic competitive sectors depend on technology types and the trade relations with exporting countries. The productivity effects of imported input on final sectors using the imported intermediates are affected not by shares of imports but by amounts of imports. The greater the industry linkage relations of industy affected by imported intermediates’ productivity are, the greater the real GDP growth rate and welfare improvement are.
Based on this analysis, we make three policy proposals. First policy proposal includes domestic technology development for replacing imported inputs, aggressive FDI promotion, and raising concern for producer services as intermediate goods to mitigate the dependency on imported intermediate goods. Second, we propose investment in human capital, enhancement of institutional level, and improvement of investment environment to strengthen the comparative advantage. Last, we recommend to develop trade policy strategy taking intermediate goods trade into consideration. The strategies include  inducing high-level concessions for industry with comparative advantage, open strategy considering technology types and industrial characteristics, increasing efforts toward exporting to enhance learning by exporting effects, and raising interest in opening intermediate service sectors.

 

The East Asian countries-Japan, Taiwan, Korea, and China-have shown better economic performance than any other region in the world with respect to increased income and reductions in poverty during the last half century. There have been thoughtful debates on whether their performance was due to a development model specific to the region which could be differentiated from development models in other regions. After the East Asian crisis of 1997~98, in particular, several economists indicated the serious problems of the development strategies in East Asia. However, the swift and strong recoveries from the East Asian crisis and the more recent global financial crisis of 2007~08 have raised the need for reevaluation of East Asia’s development model.
First, this study shows the economic performance of the East Asian countries during the last half century compared to that of other countries and regions. Then we discuss what the unique development strategies were that can be differentiated from the traditional Anglo-American model. Higher government intervention, more emphasis on exports and manufacturing, and higher saving-investment ratios are commonly understood to be the major components of the East Asian model. We compare and evaluate them with those of the Anglo-American model.
In the early stage of economic development, the governments of the East Asian countries placed their priorities on resource allocation because of their limited physical, financial and human resources. The most important criteria on which governments selected and supported industries and firms were their ability to export, because sizes of domestic markets were limited and foreign currency was badly needed for imports of technology and capital goods. They also understood that export promotion could only be accomplished through the development of their manufacturing sectors which are better suited to a trade economy than the service sector. Through this process the East Asian model put more emphasis on the export and manufacturing sectors than the Anglo- American model.
However, the East Asian crisis of 1997~98 revealed to us that the traditional East Asian model could not guarantee a sustained, long-run growth of the East Asian countries. They thus modified traditional development strategies by accepting several components of the Anglo-American model. It would be necessary for East Asian countries to make compromises in the future and harmonize their development models with those of the west, including the Anglo-American model, to obtain robust growth that can be sustained over the long-run. The balance of emphasis between government intervention and market mechanism, the balanced growth of manufacturing and service sector, more emphasis on domestic demand, the maintenance of appropriate saving ratio, and the strengthening of East Asian economic cooperation are suggested as examples of ‘harmonized’ development strategies for the future.