Financial globalization implies that there are no impediments in the transactions of financial goods across borders. It is generally recognized that financial globalization contributes to efficient resource allocations by promoting efficient investment and savings behavior. (The rest is omitted.)

The financial crisis in East Asia through 1997-98 provided a valuable opportunity for the East Asian countries to thoroughly realize the importance of regional cooperation. In the course of the developing crisis, East Asian countries observed that neighboring countries were not helpful at all due to the lack of cooperative facilities within the region, and were shocked by the attitude of mere observance by advanced countries. The East Asian countries realized that the remarkable economic growth achieved by the countries over the years had based upon nothing but a house of cards. After the crisis had passed, various kind of tools for the regional economic cooperation were discussed and developed in East Asia, including the Chiang Mai Initiative, the burgeoning regional FTAs, discourse about the East Asian bond markets, and so on. While trying to develop proper institutions and tools for regional economic cooperation, it is strongly recommended that East Asia takes an interest in the European economic integration, investigates the past experience of Europe and makes a creative adoption of it. The introduction of EMU and euro, among others, is a good example of economic and monetary integration that East Asia could follow. Competing views among the EU member states on the type of monetary union and subsequent resolution of the discord can make significant implications to East Asian countries who have just launched an early stage of monetary cooperation. (The rest is omitted.)

Import Diversification Program (IDP) was introduced in June, 1999 to diversify the sources of imports as to alleviate the chronic trade deficit with Japan and to protect our immature industry. IDP, until its elimination in the end of 1999, played a significant role in decreasing import from Japan and encouraging competitiveness in domestic companies. IDP was criticized for running counter to the rules of the WTO. As a result of the financial crisis, the phasing out of the IDP was accelerated and eventually on 30 June 1999, the program was finally eliminated. (The rest is omitted.)

This study explores competition policy issues related to movie industry liberalization in the DDA Services negotiation. Specifically, the study responds to the claim that additional liberalization measures (in the case of Korea, this means eliminating or reducing screen-quota) would bolster anti-competitive activities (such as block booking) by foreign major movie distributors operating in Korea, and result in foreclosure of the distribution and exhibition markets to Korean films. The study finds this claim to be unjustified. Although there is a trend towards vertical integration in the movie industry, and entry barrier to the exhibition end of the market seems quite high, the overall competition in the Korean movie distribution and exhibition markets is intense, and foreign distributors do not possess significant market power. If Korean films are excluded from exhibition at all, this is not likely to be a result of anti-competitive actions in distribution.
Therefore, from the perspective of competition policy, putting an ex-ante artificial ceiling on market share of foreign films through measures such as screen-quota is not warranted.
Such a direct regulation of the market is alien to antitrust principles, and should only be used when more market friendly means of regulation do not exist. The Korean competition law and policy is sufficiently developed to regulate anti-competitive activities when they do occur, and the movie industry is no exception to the application of competition policy.
This study presents a detailed analysis of economic theory and case law regarding tied-sale (or block booking), refusal to deal and vertical integration, the three vertical restraints of trade that are most common in the movie industry. It has come to be well known that such vertical restraints can have both competition restricting effect and efficiency enhancing effect. Their antitrust treatment thus requires careful balancing of the two effects, based on sophisticated economic analysis, and according to 'rule of reason.' This study concludes that in all these areas examined, the Korean competition law has put in place appropriate regulatory mechanisms.
Nevertheless, there are rooms for improvements. First, criteria for persecuting tie sales for restraint of trade needs to be changed. Economic theory suggests that the firm which forces others to purchase a tied good must have market power in the primary goods market if it is to gain monopoly profit in the tied goods market. Case law in the US thus requires possession of market power in the primary goods market as a pre-requisite for tied-sales to be in violation of antitrust law. Korean competition law and rulings regarding tied sales do not explicitly require presence of market power for tied sales to be found in restraint of trade. Evidence of unfairness and forced sale, which restricts freedom of choice in an economic transaction is sufficient for the act of tied sale to violate competition law. This should be changed in light of economic theory. Recent amendments in the law to be effective by April 2005, reflects changes towards this direction.
Secondly, as a minor point, better market concentration indices should be used when setting benchmarks for clearing vertical M&As. Currently, only the market share of the top firm or the aggregate market share of the top three are used as benchmarks. Theory suggests that whether a vertical M&A is going to be anti-competitive or not depends to a great deal on how concentrated the relevant market is overall. Thus, an accurate measure of market concentration is an important element in competition policy towards vertical M&As. The Herfindahl index, which takes into account of market shares of all the firms in the market may give a more accurate picture of the market structure. But even the Herfindahl is not perfect, and it may be advisable to consider a variety of concentration indices. Since the Korean competition authority already consults the Herfindahl index in many cases, even when not required by law, this should not be a particularly difficult undertaking.
Thirdly, developing a dispute settlement procedure specific to the movie industry may be necessary in addition to the application of competition policy. This is because many of the alleged unfair trade practices are 'unfair' from the perspective of the competitor, rather than seriously impairing competition and affecting market structure in general. The competition authority is limited in its resources and is already overburdened with issues with greater impact on competition. It should not be required to spend its energies on minor disputes between competitors. These cases should be relegated to a dispute settlement procedure. This study has not made a detailed study of such a possible procedure and leaves the task to future research. However, the dispute settlement procedure included in UIP's undertaking with EU, which partly follows the 'Rules of the Arbitral Court of the International Chamber of Commerce,' can be a good reference. Further, there are domestic dispute settlement procedures developed for specific industries (eg, telecommunications, electronic commerce, subcontracting in construction and other fields) which can provide useful guidance for the movie industry. The industry players, experts, and consumer groups are expected to participate in such a procedure. The role of the competition authority should be limited to a minimum, to the degree of guaranteeing that such a procedure is competition-friendly and do not develop into an industry cartel.
Another option is greater use of private actions. Private actions against violation of the competition law has been limited in Korea because under the current law, private action was not allowed without completion of an investigation by the competition authority. Recent amendments in the law is expected to facilitate damages claims through private actions. However, this does not extend to injunctions, and how much punitive damages can be allowed is uncertain. Hence, to what extent private action will become widely used remains unclear. In addition, private actions motivated by high damages awards can be over-used, and can also be strategically abused to restrain competitors. Considering these limitations, developing a dispute settlement procedure can be a real policy option to resolve the many disputes in the movie industry that do not have serious anti-competitive implications.
These are policies that should be considered for effective domestic regulation in response to increased expected foreign competition if additional liberalisation is forthcoming as a result of the DDA Services negotiations. In the absence of an international regime for competition policy, however, competition policy related issues must be considered not only domestically but should also be raised in the DDA negotiations. In particular, export cartels such as the Movie Producers Association (MPA) in the US should no longer be officially approved. This should be a pre-requisite to further liberalisation of the movie industry, since the rationale for approving such an export cartel was to provide compensation against protectionist measures such as erection of screen quotas in foreign markets. This can no longer be a justification when such protectionist measures are eliminated.

Executive Summary

I. Introduction

II. The Theoretical Framework

III. The Data

IV. The Results
1. The Distribution of IIT
2. The Estimation Results

V. Conclusions

References

Appendix

The purpose of this paper is to empirically investigate how intra-industry trade is linked to cross-country income difference and foreign direct investment. We distinguish intra-industry trade as either horizontally or vertically differentiated, using bilateral exports and imports data for Japan and the rest of East Asian countries at the 5-digit SITC during 1990 to 2000. (The rest is omitted.)

Executive Summary

I. Introduction

II. Asian Bond Market Initiative
1. Problems in the development of Asian bond markets
2. The background of “Asian Bond Market Initiatives”

III. Challenges and Options Faced by China
1. Stages of economic development and modes of bond markets
2. China's Bond Market: Current Situation and Problems

IV. Conclusion

References

The underdevelopment of bond markets is one of the factors contributing to the vulnerability of financial systems in Asian countries. Due to over-reliance on bank loans, it has not been possible for savings in Asia to be invested directly in enterprises. Instead savings is being funneled to international financial centers in the U.S. and Europe and then back to Asia. In case of a crisis, enterprises and financial institutions are faced with both 'mismatch in maturity of loans' and 'mismatch in currency denomination' in their funding positions. The risks inherent in the dual mismatches are sources of financial instability in Asia. Therefore there is a consensus among major Asian countries to develop Asian bond markets in order to reduce these risks. For China, how to develop its domestic bond market has become an important part of fostering Asian bond markets. Based on proposals and the recent development of Asian bond markets, this paper discusses the problems and challenges faced by China in developing domestic bond markets.

This paper examines the degree of real interest rate linkages between ten Asian-Pacific economies and two financial markets, Japan and the United States, using quarterly series of short-term interest rates from 1981 to 2003. The degree of linkages is evaluated on the basis of the empirical validity of real interest rate parity (RIP). Notably, this paper conducts a time-varying parameter estimation of the ex ante RIP with forecasted inflation rates to explore how real interest rate linkages have evolved over time. It also analyzes the relative importance of US and Japanese real interest rates in determining the rates of the Asian-Pacific economies. Whereas numerous studies have found closer linkages and, hence, growing integration between the Asian-Pacific economies and Japan, this paper finds that the linkages with Japan have gradually declined from around 1990 or before in Singapore, Taiwan and Hong Kong. Our results will yield significant implications for a possible regional monetary union, as financial integration is viewed as one of the preconditions for an optimum currency area.

A Japan-Korea Free Trade Agreement (FTA) is very likely to trigger a domino effect that induces other East Asian nations to aggressively pursue FTAs. The resulting liberalisation is likely to be good for the region, but there is a danger. The political economy force that drives the domino effect tends to produce hub-and-spoke bilateralism-an arrangement that is economic inefficient and potentially divisive since Japan and China are the two natural hubs. This paper begins with a summary of the negative effects of hub-and-spoke bilateralism and a discussion of the political economy forces that drive it. (The rest is omitted.)

Since the nineteenth century, there have been conflicts among China, Korea, and Japan as in European countries. Despite the history of conflicts, European countries have already reached a common community, while these three countries in Northeast Asia hesitate to build an economically integrated system. Before and behind the Asian financial crisis in 1997, there have been some attempts of economic cooperation in East Asia. Nevertheless political integration in Northeast Asia remains stagnant because these countries have hostile historical background with each other, and have uncertain sovereignty. Even though there is still anti-Japanese sentiment in Korea and China, cultural exchange continues to increase between these countries and Japan. The new generation leaders in China and Japan will lead the regional integration in this area.

Regional economic integration has been an important issue for decades in Europe and North America. However, this has been less the case in East Asia due to the complexity and diversity of politics, diplomacy, culture, and economics. (The rest is omitted.)