. Introduction
II. Legal Foundations for RTAs under the WTO System
1. WTO-RTA Relationship
2. WTO’s Legal Framework for RTAs

III. Review of RTAs in WTO: A Two-Track Approach
1. Political Track
2. Judicial Track

IV. Some Reflections on Further Clarification and Improvement
1. Linkage between Factual Presentations and Dispute Settlement
2. Linkage between Notification and Dispute Settlement
3. Post-Formation Monitoring System?

V. Conclusion

References

Given different legal regimes which govern the global and regional trading systems, the WTO as such cannot stop the proliferation of RTAs. Nevertheless, the WTO can oversee them through its political and judicial review procedures. Notably, Article XXIV of the GATT, Article V of the GATS and the Enabling Clause contain certain procedural requirements for notification and multilateral review of RTAs concluded by WTO members (political track). In addition, RTAs may be challenged in WTO dispute settlement procedures (judicial track). This paper examines legal provisions and practice of the WTO review mechanisms, explores possible remedies for WTO-inconsistent RTAs, analyzes the transparency mechanism for RTAs, and in particular specific issues of linkage with the WTO judicial review procedures and the possibility of extending the scope of the transparency mechanism to the post-formation period of notified RTAs.

 

In this regard, the materials published herein can be construed as a summary of all the research that has been conducted at KIEP over the past 20 years, or since our foundation in 1990. These include reports prepared by KIEP’s various research teams that have been published such as Policy Research, Regional Economic Focus and Policy Analysis; our research on current issues featured in journals as KIEP World Economy Update; monthly magazines such as KIEP World Economy; the bi-monthly magazine OECD FOCUS; working papers such as the Journal of International Economic Studies; and other periodicals. The research included in this collection can in many ways be regarded as the fruit of the wisdom and sweat dispensed by our research teams since KIEP’s foundation.

Policy Analysis/Policy Analyses I/Conference Proceedings/Korea’s Mid & Long-Term Trade Strategy/Studies in Comprehensive Regional Strategies/Regional Study Series/Trade and Investment Study Series/Policy References I/Working Papers/CNAEC Research Series/SNU-KIEP EU Centre Research Series/Monographs

2009 Summaries of Research Reports

2009 Summaries of Research Reports

It is estimated that 2,600 interest groups maintain offices in Brussels for purposes of lobbying EU institutions, which involve around 20,000 lobby-related personnel. Why has European lobbying developed to such extent concerning the various activities in the EU decision making process? We will answer this question by first offering a definition of ‘lobbying’, and then focusing on the broader context of European integration. “Lobbying” refers to attempts to exert influence either directly or indirectly on the formation or implementation of public policy. Development of European lobbying has run parallel to European integration, which has been characterized by increasing competences of EU institutions. As the latter covered a wider range of areas under their regulatory powers, there is increasing necessity for interest groups to increase efforts to raise their voice, and reflect their concerns and interests on European regulatory policy.
European lobbying has developed in correlation with the European Commission, which is responsible for proposing EU legislations, and shows a following pattern. As regulatory powers of the European Commission develop, the Commission faces difficulties in obtaining sufficient expertise and information required for legislative proposals. In addition, the Commission has increasingly come under criticism for their lack of democratic legitimacy, which is being considered a structural limit of the EU’s governing system. In order to overcome these challenges, the Commission has tended to accept external voices, organizing various committees and expert groups. A number of interest groups including trade associations, companies and NGOs have actively participated in this consultative process and have tried to reflect their interests on the Commission’s legislative proposals. Interest groups have also focused on the European Parliament, as its competences have considerably strengthened since the mid-80s. Differently from the European Commission, a bureaucratic organization, the European Parliament, as the only European institution whose members a democratically elected, has been accommodating towards lobby groups in consideration of its representative nature and general interest of European citizens, as well as for access to expert knowledge.

 

World trade, which was substantially reduced in 2009 due to the global economic crisis, has begun to recover this year. However, global imbalances have not been completely remedied, and are expected to become bottlenecks that will hinder sustainable growth of the global economy. This study analyzes the changing patterns of comparative advantage since the early 1990s and investigates the sources of comparative advantage in major countries including the US, EU, China, Japan, Korea, the ASEAN countries, India, Brazil, Mexico, and Russia among others.
In the second chapter, we analyze the various types of comparative advantage indexes for the above-mentioned 10 countries. The analysis of Balassa's Revealed Comparative Advantage (RCA) reveals that the RCA indexes for Korea, India, Russia, and Brazil turned out to be relatively high. The analysis of the Index of Revealed Symmetric Comparative Advantage (RSCA) indicates that Korea, China, the ASEAN countries, the EU countries, Brazil, and Russia are currently maintaining comparative advantage in the world market. Analysis of index of trade concentration reveals that Korea, Japan, the ASEAN countries, India, and Brazil concentrate on specific export products. When we decompose the intra-industry trade (IIT) into horizontal trade, high-quality vertical trade, and low-quality vertical trade, it reveals that the share of Korea's horizontal trade has increased, while low-quality vertical intra-industry trade dropped recently and high-quality vertical intra-industry trade has stabilized.
The third chapter investigates the dynamic patterns of comparative advantage using various approaches including the Markov transition matrix, the marginal intra-industry index, and the Galtonian regression models. The analysis of the Markov transition matrix reveals that the probability of products staying in the same level of comparative advantage is relatively high. The measurement of the marginal intra-industry index (MIIT), which decomposes the inter-industry trade into increase in the previous specialization (IPS) and the specialization shifts (SS), indicates that the marginal intra-industry trade index increased before the global economic crisis in 2008, but dropped after the crisis. The estimation of the Galtonian regression models reveals non-existence of β-specialization in most countries.
The fourth chapter derives a consolidated regression equation to estimate the sources of comparative advantage, integrating the Heckscher-Ohlin model, the Ricardian model, and the gravity model. It also sets up a consistent dataset for the 65-country and 42-industry based on the GTAP, the World Bank, and the UN database.
The estimation results generally confirm the three competing models. The signs of the estimates such as production factors and total factor productivity turned out to be positive in all significant results. In addition, the gravity variables including the distance variable and dummies such as borders, languages, colony, and FTA explain the changes in trade share very well.
The explanatory power of the three competing models, however, turned out to be different depending on regional and sectoral groups. A sign of the capital turned out to be negative in case of the regressions for the natural resource intensive sector, but they are not statistically significant. In case of the Ricardian model, this paper does not indicate that technological difference is statistically significant for the sectoral groups. It is interesting to see that the sign of the colony dummy for developed countries, other European countries, and Central America turned out to be different from the prediction. It is also notable that the sign of the FTA dummy for Africa turned out to be negative due to the trade diversion effect.
The fifth chapter examines the relationship between measured comparative advantage according to the factor proportions (Heckscher-Ohlin-Vanek-Leamer) hypothesis and Korea's embodied trade against its major trading partners.
The results reveal that Korea is most abundant in unskilled labor and least abundant in skilled labor when measured against the United States and Japan. The opposite is observed when measured against China. The results also show some evidence that Korea's human capital abundance is increasing between 1995 and 2005, but the extent is still quite small.
The sixth chapter suggests future policy directions as follows. First, Korea needs to set up policies to diversify its exports and identify promising competitive products in the world market. In addition, it needs to upgrade the technological competitiveness in order to grow into a major trading nation. Second, Korea should strengthen the various sources of comparative advantage to adjust itself to the changing world trade structure and homogenizing consumer demands. Korea needs to set up global FTA networks to make the best of its sources of comparative advantage. Third, Korea needs to set up an institutional framework to support the accumulation of human capital. It is because the importance of human capital relative to physical capital has been increasing as a source of comparative advantage in Korea.

Developing renewable energy which can replace the fossil fuel has become a major task for all countries. Efforts to find renewable energy are gaining momentum due to high price of crude oil, which has remained high from the early 2000s, and is expected to rise even higher. In addition, the environmental issue is becoming a truly global issue, meaning questions concerning development of green energy have now taken center stage.
The bioenergy is drawing attention as an alternative source of renewable energy source; there are also solar and wind power, which can replace crude oil. Solar power is especially important in Sub-Saharan Africa as the next-generation energy source.
The attention being paid to development of bioenergy is due to its potential to resolve the shortage of electricity in Africa. Africa suffers from a severe energy shortage - the ‘darkest’ continent where half the entire population of the continent does not have access to the electricity. The lack of electric power in Africa, in turn, worsens poverty because it hampers not only the operation of industry but also social welfare apparatuses in public health and education. Although there were many attempts to expand the power supply by constructing new power plants, it is a problem without short-term solutions. But if the sources of energy are diversified, it would reduce Africa’s reliance on fossil fuel.
Bioenergy also happens to be the most efficient form of renewable energy for Africa’s rural areas, where the 70 percent of the continent’s population live. As it would be impossible to build a power grid for rural areas, which has poor infrastructure and low population density, bioenergy that can generate power for use at the local level has come into the spotlight.
Another significance of bioenergy development is found with aspect to the environment and public health sector. The power situation in Africa is poor: 550million Africans depends on the traditional energy sources such as wood, leading to destruction of forests. Even oil-producing countries in Africa are heavily dependent on biomass energy. Such destruction of forests cause serious damage to African rural economies still dependent on gathering and collection. Many women and children suffer from respiratory disease caused by air pollution, the most serious consequence of overuse of biomass energy.
Other than diversification of energy and protection of the environment, bioenergy development can increase income in rural Africa. Bioenergy uses energy sources already existing in rural areas, and thus can create work through production, transportation, trade and processing. In Brazil, production and consumption of bioenergy in the form of bio-ethanol and bio-diesel; has reduced fossil fuel dependence, created jobs, and increased income.
Abundant farmland and labor force gives Africa great potential for developing bioenergy. By 2050, Africa will cultivate more than 40percent of bioenergy crops of the world according to the OECD report.
However, there are many obstacles to developing bioenergy in Africa. Though African countries including South Africa, Tanzania and Mozambique give increasing attention to the bioenergy industry, it is hard to find strategic and long-term plans at the governmental level in most African countries. It should be noted that Brazil's success was backed up by strategic government policy for the bioenergy industry.
There is also the issue of poor infrastructure, which hinders economic growth in Africa. Case in point, poor road conditions disrupts travel, as well as increasing the logistics costs. This makes exports of bioenergy difficult, not to mention making bioenergy less than profitable. Poor infrastructure may be a problem common to developing regions, but Africa’s infrastructure situation is especially acute. Two examples highlight this point: ① Transporting a car from Japan to Cote d'Ivoire costs 1,500 dollars, but transporting a car from Cote d'Ivorie to Ethiopia costs more than 5,000 dollars, ② Transporting coconut oil from Indonesia to Mombasa, Kenya, costs 40 dollars per ton; but coconut oil being shipped from Mombasa to Kampala, the capital city of Uganda, costs 100 dollars per ton. In the second case, the product travels 1/6 the distance, but costs twice as much. The transportation cost alone takes up 3/4 of the price for export goods shipped from a landlocked country to the coast, with shortage of ports adding to the difficulty in exporting. This reality of poor African infrastructure means that African export goods are critically handicapped in terms of price competitiveness.
As for Korea, given its expensive farmland as well as expensive labor, it is important to obtain bioenergy crops at low prices from overseas, but it must take into consideration the local situation and distribution problems in Africa.
It is also necessary to emphasize development of bioenergy with respect to Korea’s ODA. Bioenergy-related businesses should first build a system of cooperation when it enters Africa. Collaboration in rural Africa in terms of IT is made difficult by the shortage of power supply, which poses formidable obstacles to operating a telecommunication base station there; but collaboration on Bioenergy development can actually help solve the problem. For instance, foreign telecommunication industries, GSMA (GSM Association), MTN and Ericson, use bio fuel - palm oil and jatropha - which are locally farmed, to supply electricity for their base stations.
The downside of African bioenergy development is shortage of food produced by the farms. Bioenergy development should take the place without hurting food crop cultivation. But 1st generation bioenergy, bioenergy from food crops, will only achieve limited usage due to the food security problem; thus leading to the growth of 2nd generation bioenergy, non-food crop bioenergy, which is expanding in importance. Jatropha is a non-food crop which can be found in tropical regions, growing well in seemingly inhospitable wastelands. This plant, which can be grown on a massive scale, contains much oil which is suitable as a source of bio-diesel. Extraction is not difficult, as jatropha oil can be squeezed out easily using a simple machine, so the production boom is expected to occur in farms around Africa. The concerns over development of bioenergy reducing farmlands in Africa can be laid to rest when the vast, open fields of Africa accommodate this new source of biofuel.

Acknowledgement

Contributors

1.Comparative Study on Changing Pattern of IndustrialStructure Between China and Korea

2.Effects of Structural Change and Income Distribution on Employment: Experience of India and Korea

3.Corporate Social Responsibility Investment and SocialObjectives: An Examination on Social Welfare Investment of Chinese State Owned Enterprises

4.Genesis, Evolution, and the Changing Role of SEZs in Asia:A Comparative Analysis of Taiwan, Korea and India

5.Enhancing the Rural Development Policy Space: Will theSaemaul Movement be Adaptable to Africa?

6.Characteristics and Significance of Socio-economic Development of the Far East and Baikal Region in Russia for the Periodtill 2025

7. General directions of Integration Processes Extension of theRepublic of Uzbekistan into International EconomicalSystem

8.Vietnam-Korea Trade: Complementarity, Competitivenessand Implications for Further Trade Expansion

9. Asian Regional Economic Integration after the Global Crisis:Challenges and China’s Response

Korea Institute for International Economic Policy (KIEP) has expanded its cooperative relations with the world since it took the role of the hub of regional studies in public research areas of Korea. As a part of our systematic efforts to foster international exchanges and build the knowledge based through interdisciplinary collaboration, The Center for Regional Economic Studies (CRES) initiated a researcher-exchange program called CRES Visiting Fellows Program in 2008. The program brings together influential professionals from academia and the public sector to advance individual, institutional and national understanding of regional economic matters and to improve international cooperation on related research. This volume is a part of our achievements through the program and we hope this proceeding would work as another channel to deepen the understanding of regional economies in Korea.

This paper explores the development and climate change issues in terms of assistance to developing countries. In an attempt to identify policy implications the above issues will have on Korea’s development cooperation strategy, the authors review the evolution of discussions concerning climate change mainstreaming and climate financing among the international development community.
The growing consensus is that the climate change issue is not a standalone factor affecting the growth paths for developing countries. They are rather closely intertwined, and this paper reviews the relationship by focusing on climate vulnerabilities that developing countries are facing and how the two factors interact to ultimately affect development objectives such as MDGs(Millennium development goals). In this regard, OECD Development Assistance Committee(DAC) recently released a set of policy recommendations entitled ‘Integrating climate change adaptation into development co-operation’, to stress the importance of climate-related considerations in delivering development assistance projects.
This paper views the assistance to developing countries from two perspectives: historical responsibilities(climate financing) for developing countries and environmental considerations in achieving overarching development goals(climate ODA). In this regard, the issue of financial needs for developing countries to cope with climate change in order to curb its negative impacts and to adapt and respond to possible damages from climate-related disasters are closely reviewed. Increasing number of bilateral and multilateral donors have been involved in assisting developing countries in the latter’s efforts to adapt to and mitigate the effects of climate change. At the core of the debate on financing response and adaptation measures to climate change in terms of quantity are: financing needs and options, duplications with current ODA, ODA diversion, statistical reporting as well as the governance of financing mechanisms.
As Korea is poised to expand its ‘green ODA’ through several initiatives such as the ‘East Asia Climate Partnership’, the authors conclude by suggesting Korea should adjust its strategies to integrate climate change issues into their development cooperation policy and practices as well as to identify the financing options for effective delivery of assistance to developing countries.