Korea-Chile FTA: Background, Economic Effects and Policy Implications Inkyo Cheong and Kyounghee Lee
Though Korea achieved economic growth under the multilateral system of the GATT/WTO, its reaction to a widening spread and deepening of regional trading blocs has been lukewarm, due to domestic opposition to market opening under regional trading agreements. However, since the financial crisis began, the Korean government has been reevaluating the potential gains to be made by removing trade barriers on a preferential basis, and has decided to pursue the establishment of preferential trading blocs.

Regionalism is one of the most dominant trends in the world economy today. In line with this increasing trend towards regional integration, Korea has altered its past position opposing regional trade blocs and is now cautiously investigating the establishment of FTAs with major trading countries. Koreas new trade policy is aimed at promptly adapting to the changing economic environment, as well as resolving the countrys economic difficulties.

Consequently, an ultimate goal of this policy is to transform Korea into an open trading country, which makes a meaningful contribution to opening up the world economy at the international level, while at the national level the government remains committed to opening its market through parallel development of democracy and a market economy.
In addition, it is recognized that the supplier-oriented trade policy of the past must be changed into a consumer-oriented policy that maximizes the convenience and benefits of the general public. In terms of cost-efficiency, the publics well-being is better served when the majority of consumers can be supplied with low-cost and high-quality goods rather than defending the interests of a minority of producers. Therefore, the government must perform the role of opening up the domestic market, so that its people can enjoy an abundance of low-cost and high-quality goods and services.

This liberalization has been viewed as beneficial by most Koreans, and there is a growing perception that the establishment of FTAs with major trading partners will bring greater welfare gains. Moreover, Korea has recognized the importance of stable export markets; it is thought that the current account deficit that preceded the financial crisis resulted in worsening international confidence in the Korean economy. Another important background factor in the current trend towards regionalism can be found in trade policy makers recognition of the necessity of upgrading Koreas economic system to meet international standards.

Korea chose Chile as its first FTA partner because of high complementarity in trade structure and learning effects from Chiles plentiful experience in regional trading agreements, while Chile chose Korea because Chile highly valued Koreas close linkage with neighboring Asian countries (Chile can take advantage of Koreas trade linkage for widening Chiles market access to other Asian countries), as well as Koreas growth potential through performing strong reforms in several sectors including financial sector.

Cheong (1999) analyzed the economic effect of the potential FTA between Chile and Korea by using a CGE model. The CGE model is a general equilibrium model that has the advantage of determining the re-allocation effects of the resources caused by the cross-sectoral reallocation of production factors, which the partial equilibrium is not able to deal with.
Korea is expected to gain more benefit from the tariff elimination between the two countries. For example, preferential tariffs imposed by Chile on Canadian and Mexican exports through the FTA between two countries are now acting as main barriers for Koreas export products such as automobiles and tire that are highly competitive with those products. In this regard, the conclusion of a Korea-Chile FTA will provide Korean products with price competitiveness, enabling them to better compete with other countries in Chilean market. This inference can be supported in the Mexicos case, which has an industrial structure similar to Korea, taking as an example of the MexicoChile FTA.

Mexican exports to Chile were jumped from 180 million dollars in 1992 to 930 million dollars in 1996. Korea is also expected to enjoy similar level of export expansion effect, if Korea establishes an FTA with Chile. According to authors calculation, the FTA seems to result in Koreas welfare improvement of 960 million dollars. This result, however, does not consider service trade effect and market expansion effect. The actual improvement is expected to be even greater if we include them.

Among Koreas export sectors, some competitive sectors with greater market share in Chile will be particularly benefited from a Korea-Chile FTA. They are automobiles (occupying 18% in Chilean import market), refrigerator (31%), microwave oven (69%), washing machine (65%), tire and automobile battery, textile, elevator and PVC.

As for Korea, among the manufacturing sectors, the copper processing industry will be mostly affected as imports of copper and related products from Chile will increase with the establishment of a Korea-Chile FTA. This is because Chilean copper is leading the first position in the world in terms of exploitable reserves, production and exports volume. The mining sector is the most important and competitive sector in Chilean economy, accounting for more than one half of global exports.

One of the main reasons why Korea selected Chile as its first FTA partner is that the negative economic effect will not be so great on Korea agricultural sector. Agricultural imports from Chile was only 26 million dollars in 1997, 6 million dollars in 1998 and 15 million dollars in 1999, accounting for only 0.09% and 0.22% of Koreas total agricultural imports, respectively.

In Korea, main agricultural imports from Chile are confined to some fruits such as fresh grape, kiwi and tomato paste. As for grapes, however, Chiles marketing season is very different from Koreas due to the reverse geographical location (South and North Hemisphere).

Korean government, in any way, should take a deliberate stance against the potential industrial damage on sensitive sectors by carefully examining economic effect of a Korea-Chile FTA. To minimize severe restructuring cost, Korea can also consider the partial exclusion of the most affected sectors from the FTA or demand the provision of transition period for the sensitive sectors.

The government officially decided to negotiate an FTA with Chile in December 1999 and currently, the two economies finished the 4th round of negotiations December 2000. The successful conclusion of the first FTA will be of special importance for Korea because other potential FTAs will heavily depend on the first model. Most likely, negotiations will last one to two years. However, talks regarding sensitive areas of trade could potentially prolong the conclusion of the negotiations. Korea's manufacturing sector favors a Korea-Chile FTA, as most of Korea's exports to Chile consist of such manufactured goods as automobiles and electronic goods, while the agricultural sector, fearing an increase of such Chilean exports as grapes and kiwi, and the fisheries industry are deeply concerned about a Korea-Chile FTA.
Beyond the sensitive nature of various trade items, there are a number of other issues of concern surrounding Korea's FTA policy. The first issue to be considered is the need for public awareness for the potential benefits of preferential FTAs. One of main obstacles to gaining consensus for pursuing FTAs is the lack of public knowledge or a negative attitude towards trade liberalization. Most people think that trade liberalization will only contribute to the growth of imports. Some fear that the complete elimination of tariffs will be applied as soon as an FTA comes into effect, thereby requiring huge adjustment costs in some sensitive sectors in the short-term.

The drawbacks of trade liberalization are usually exaggerated, while the benefits are often underestimated. Some even consider that an FTA with large economies will be a form of economic subordination. Therefore, the government should strengthen the publicity activities on the pros and cons of preferential trade liberalization.

The second issue is the harmonization of multilateralism and regionalism. As discussed earlier, Korea has been one of the most active supporters of the GATT/WTO system. Developing countries such as Korea, Taiwan, and Singapore, have benefited from the more liberalized global trading environment under the present multilateral system. The significance of free trade under the multilateral system will not be diminished, even Korea pursues the conclusion of FTAs. The government should continue to take full advantage of the WTO, with actively participating in the framework-building processes of international trade organizations, including the WTO and the OECD, to ensure that trade rules are fair and favorable to weaker countries.

This study aims at recommending strategies for WTO negotiation on GATS rules, including emergency safeguards, subsidies and government procurement. The discussion on these GATS rules has gained a momentum since February 2000 when the WTO services negotiation restarted as a built-in agenda.

Among the three items, emergency safeguards has been the most widely discussed. The key issues are the definition of domestic industry and the scope of acquired rights of foreign service suppliers. It is desirable to include foreign service suppliers as domestic industry not to interfere with the current policy of promotion of foreign investment. Yet, it can be considered not to entitle them to invoke dispute settlement procedures.

In regard to subsidies in services, the definition can draw from the Agreement on Subsidies and Countervailing Measures (ASCM) on trade in goods. The specific characteristic of services trade can be incorporated in remedies. For remedies on trade distorting subsidies, we can consider the method used in agriculture agreement, which is committed to reducing a certain amount of subsidies. Alternatively, we can use the dispute settlement procedures employed in ASCM.

The rules on government procurement is weak in the WTO system. The Government Procurement Agreement has weaknesses since it is plurilateral. Even though there is a possibility that this item will be handled in other working groups such as Working Group on Transparency in Government Procurement, it is in our interest to pursue the liberalization of government procurement in the GATS context. It is because Korea has already implemented liberalization in this area and can enjoy benefits from opening foreign markets, especially in government procurement of construction.

Among these three items, it is desirable to focus on the emergency safeguard, since it is in this item that most developing countries show interest. The government should be attentive not to obstruct the whole services negotiation due to the delay in talks on subsidies and government procurement.

Since the 1990s, the international financial environment has changed fast in terms of globalization, diversification, deregulation and innovation. The development of information and telecommunications technology has led banking institutions to shift from the traditional lending and borrowing activities to multi-financial projects and development of new financial products. Financial engineering has generated various derivatives and international financial transactions have, thereby, been diversified, with the various loosening restrictions on the financial industry.

On the 21st century, the financial industry will have achieved a unified international financial market, due to international financial liberalization and cross-border services under the WTO New Round. With more competition and removal of entry barriers in the international financial market, developed countries have promoted M&As in the financial industry and universal banking system.

After financial crisis, important steps were taken to increase foreigners' access to the banking sector in Korea such as subsidiary and ownership of banks. The benefits of liberalization in banking sector is as follows: to facilitate the exchange of goods and services; to facilitate risk management; to mobilize resources; to obtain information, evaluate firms, and allocate capital; and to provide corporate control. However, there are possible negative effects such as increase in unemployment, higher foreign capital occupancy of the local market, more influence of foreign capital on domestic market and intervention in domestic corporate. Also, freer capital flows have the effect of smoothing consumption over time, and it has to be recognized as the benefit of the liberalization.

We investigated the trend in penetration of foreign banks into the Korean market. Given the regulatory restriction, it has been confirmed that the extent of the penetration remained limited. Foreign banks in Korea have been engaged in foreign currency lending business to Korean corporations and banks, which was funded by their parent offices. Since the share of foreign bank has been too minor to bring about serious changes in charter values of Korean banks and the competitive environment of the Korean banking sector, we focused on their behavioral patterns. We found that their foreign currency lending was neither pro- nor counter-cyclical in contrast to their Korean currency lending which was pro-cyclical. Also interestingly, foreign currency lending of Korean banks turned out to be pro-cyclical.

Foreign banks in Korea were able to provide rather stable foreign currency lending service irrespective of macroeconomic fluctuation of the Korean economy. Foreign banks have more cushions to absorb cyclical shocks specific to the Korean economy than Korean banks. Hence, we argue that allowing commercial presence of foreign banks should be expected to be beneficial in this regard.

It is too early to make a comprehensive assessment of the impact of the liberalization of banking service. However, we conjecture that the ongoing restructuring and entry of foreign banks will make the domestic banks more competitive. In order to survive, management should be independent and efficient. In other words, The Korean banking services should establish the responsible management system and asset soundness. Also, financial infrastructure should be established through improvements in accounting, credit ratings and payment system. The range of banking services needs to be enlarged through development of various products and management skills, along with M&As and joint business with other banks. Consistent market liberalization will more rapidly drive financial globalization. This will lead to the advanced financial institutions as in developed countries.

Effects of NAFTA on US, Canada, and MexicoWon-Ho Kim·Moonsung Kang·Suyeob Na·Jin O Kim

The structure of the economic environment in North America has changed markedly over the last decade. Canada, which had long avoided free trade with the United States, pushed for the Canada-U.S. Free Trade Agreement (CUSFTA) which came into effect on January 1, 1989. In addition, the North American Free Trade Agreement (NAFTA) went into effect on January 1, 1994. The NAFTA has become one of the world`s best-known free trade agreements. It is also significant on the reason that for the first time ever, a dveloping country sat down with two industrialized countries and created an agreement that opens its economy to the challenges and opportunities of the North American marketplace. Seven years ago, three countries were in the midst of vigorous debate about the economic future of their own country. They debated whether they should open their economy to greater competition and secure a new set of rules to govern their trade relations with each other. The purpose of this research is to compare the real effects of the NAFTA with the economic outlook proposed before the NAFTA.

As a result of the NAFTA, trade volume in North America has incredibly increased. This feature is compatible with the main purposes of the NAFTA: (1) elimination of barriers to trade and (2) promotion of fair competition. The trade pattern in this region indicates that Canadian and Mexican trade-dependence on US is increasing in the recent years. Thus we expect that a rise or fall of US economy would directly affect Canadian and Mexican economies.

Fighting Against Laundering and Illegal Captial Flight in Korea-Case Study of FIUs and Policy Directions -
Hyungdo Ahn et al.

For the last 10 years, major countries around the world have endeavored to establish money laundering prevention system domestically on the one hand, and to pursue mutual cooperation by launching international fora on money laundering and encouraging other countries to adopt FIU system on the other. International fora such as UN, OECD, and Egmont Group have recommended the nations to introduce money laundering prevention system through the legislation of Anti-Money Laundering Act and the establishment of a Financial Intelligence Unit. In particular, OECD had set up the Financial Action Task Force on Money Laundering(FATF) in 1989 and all the OECD member countries except Korea and Poland have been participating in the activities. In 1995, Egmont Group has been formed to boost the cooperation among FIUs around the globe.

Korea will enforce the second-stage foreign exchange liberalization beginning January 2001. The former 'Foreign Exchange Management Act' took the role of preventing the flow of 'bad' money originated from the crimes and illegal capital flight. However, the implementation of the second-stage foreign exchange liberalization meausures would ease the manipulation resulting in the increase of money laundering and illegal capital flows. Therefore, Korea is in urgent need to introduce the FIU system.

This report intends to draw the blueprint for the Korean FIU system. The report surveys the current status of 21 FIUs around the world and proposes the FIU system which is appropriate to Korean society. Besides the enactment of Anti-Money Laundering Act, Korean should introduce three elements. First, a Financial Intelligence Unit(FIU) should be established to collect, analyze, and provide information on illegal financial transactions. Second, Suspicious Transactions Reporting System(STRS) should be introduced to require financial institutions to make reports on suspicious transactions. Third, financial institutions should establish internal reporting systems and training programmes to encourage and facilitate the reporting.

Since the South-North Summit, financing North Koreas economic development has become a major issue for the future of economic cooperation between the two Koreas. In order to tackle more systematically the problem of financing the expenses and draw implications for Korea, this study analyzes the experiences of the countries that have attempted a transition to the market economy system such as China, Vietnam and East European countries. Having explored the possibility of applying the lessons from the cases, this study suggests concrete plans for North Korea based on its realities and circumstances.

In the case of China in raising economic development expense, it analyzes Chinese policies toward the introduction of foreign capital, focusing on the interactions and linkages among foreign capital, the reform and open-door policy, and development strategies during different periods. The analysis of foreign investment in China examines the degree of its influence on Chinese economic development. China's reform and open-door policies were promoted fradually, unlike the countries of the former Soviet Union and Eastern Europe and succeeded in inducing foreign capital by establishing the special economic zones and open economic areas mostly in costal areas.

In the case of foreign capital importation in Vietnam, it begins with an examination of Vietnam's foreign capital inducing strategy, focusing on the reform process and policies on foreign capital, and analyzes the actual cases of foreign investment in Vietnam. Vietnam has promoted a positive policy for foreign investment since the adoption of the reform and open-door policy in 1986. However, there are still many constraints on improving relations with international financial institutions and Western countries, especially because of the US-led economic sanctions. With Vietnam's withdrawal from Cambodia in 1989, however, the Western countries began their advance into Vietnam in earnest, and the United States resumed dialogues with Vietnam for a peace settlement in Cambodia and Indochina in August 1990. The level of economic sanctions has been lowered as the United States offered a timetable for the normalization of diplomatic relations with Vietnam under the condition that the American MIA issue be settled.

East European countries pursued an aggressive transition to a market economy in the late 1980s and have achieved positive results in economic reforms since the mid 1990s. In the cases of East European countries, it first examines the process and characteristics of the economic reforms in East European countries, and makes a generalization about the foreign capital importation policies adopted and carried out to finance the expenses for economic development. Based on the categories of foreign investment, foreign capital importation in each country is analyzed in a concrete way.
The countries in transition undergo a comparable process of economic transformation. The directions of reform, however, vary according to the specific conditions such as industrial structures and international dependency. There are also differences in the methods to attract foreign investment required for the economic transition. China, characterized by a low level of industrial development and abundant resources, pursued an aggressive policy to attract foreign capital by establishing special economic zones and open economic areas. In contrast, the resource-poor countries in Eastern Europe which had attained a high level of industrialization, attracted international public funds from the early stage by implementing the IMF restructuring programs. The cases suggest policy directions for North Korea regarding how it should finance the development funds needed for economic recovery or possible reform and opening.

The policy that North Korea currently employs in order to induce foreign investment is based on the establishment of special economic zones where the rules of a market system are allowed. The outcome, however, has been deplorable for the last eight years since the adoption of the policy. Considering the limited scope of overseas national capital inflows, in contrast to the large inflow of overseas Chinese capital invested in Chinas special economic zones, it is not advisable for North Korea to finance its development expenses through the special economic zones. It is more realistic to attract international public funds in the process of restructuring North Koreas overall economic system and establishing and applying nationwide the rules of a market economy.

This study aims to propose negotiation strategies for Korea toward the WTO rules area, focusing on the issues in which major countries have shown deep interest and thus have a high possibility of being placed on the agenda of the WTO New Round. This study covers anti-dumping, subsidies and countervailing measures, rules of origin, Article 24 of GATT (1994), TRIPs and trade facilitation.
It is very hard to predict clearly whether anti-dumping will be included in negotiating agenda of the New Round. While most WTO member countries support the amendment or revision of the current WTO Agreement on Anti-dumping, the United States, the most influential country in the multilateral trading system, strongly opposes it. Nevertheless, considering the increasing trend of anti-dumping initiations since the launch of the WTO, we cannot exclude the possibility of anti-dumping issues being discussed in the New Round negotiations.

When the New Round deals with anti-dumping issues, Korea will have to suggest a strong proposal to restrain the abuse of anti-dumping measures. In that regard, it is important for Korea to lead the negotiation so that the WTO member countries agree on establishing far stricter rules or conditions on the initiation of anti-dumping. Upward adjustments of criteria for de minimis dumping margins and negligible dumped imports as well as clear criteria for the determination of dumping and injury are also expected to have similar effects.

At the same time, the current review system should be redressed so that the extension of anti-dumping actions can be properly restrained. Issues regarding anti-circumvention and retarded establishment of a domestic industry are also important for Korea.

In the area of subsidies and countervailing measures, major issues in the New Round will be: expanding the extent of non-actionable subsidies, granting more flexibility in using export subsidies to developing countries, preventing abuse of countervailing duties as well as subsidies on fishery and investment incentives. Among these issues, it is desirable to put priority issues related to non-actionable subsidies and export subsidies on developing countries. Progress on these issues, in which most developing countries show interest, is helpful for the success of the New Round. In order to prevent negative impact on Korea's exports, the Korean government needs to focus on raising the conditions on de minimis and environmental subsidies. The government needs to be cautious regarding other issues, since they will be dealt with in other areas such as investment, environment and anti-dumping.

The importance of the principles that apply to the origin of products is growing following the current world economic situation, including multinational firms and the outsourcing of materials. The harmonization of nonpreferential rules of origin is under way in the WTO. However, the interests of member countries are very different and the process can not build consensus. Therefore, the conclusion of the process is considered as on the agenda at the WTO New Round. If the harmonized nonpreferential rules of origin are made as the result of the WTO New Round, they will work as the standards of the decision of most favored nation, anti-dumping, safeguard and other important trade- related rules. Therefore, the Korean government should form a task force including experts from the business world to formulate its own position in the negotiation of rules of origin.

The number of regional trade agreement that were notified to the WTO reached 209 as of October 1999 and the amount of trade within RTAs accounts for over 50% of world trade. Therefore, some member countries insist that the revision of WTO rules related to regional trade agreements to improve the transparency and guarantee WTO consistency of RTAs should be included in the WTO New Round. The Korean government should join them to clarify the WTO rules and assure the national interest from the overflow of regional trade agreements.

The built-in agenda regarding the TRIPS Agreement in the New Round consists of issues concerning geographical indications, protection of biological diversity, provision of protection to life forms, and exemption of patent protection for essential drugs. Furthermore, developing countries are likely to raise new issues such as renegotiation to extend the grace period, provision for the protection of traditional intellectual property rights and strengthening of technology transfer as well as technical cooperation. While developed countries are reluctant to renegotiate the TRIPS Agreement, they are interested in its revision to reflect the advancement in areas such as electronic commerce.

In general, the strengthening of intellectual property rights would induce innovation in a country such as Korea, which has achieved some level of technological development. Rather than resisting the implementation of TRIPS, therefore, it would be desirable for Korea to support further innovation and protection of intellectual property rights through various institutional reinforcements. Most importantly, related policy and negotiating strategies must be formed based on solid empirical studies on the effect of the strengthening of intellectual property rights on innovation and the economy, rather than as reluctant response to pressures from major trading partners.

The WTO discussions on the trade facilitation issue, which was initiated at the 1996 Singapore Ministerial Conference, can be characterized by the conflicting positions of two camps. The EU proposes that the WTO establish comprehensive trade facilitation rules, while the US and Japan have put emphasis on revising the existing WTO rules related to trade facilitation. Korea should propose that the WTO establish the rules on trade facilitation covering general principles. However, considering such conflicts and respecting the previous activities of international organizations including the WCO, it would be desirable that the WTO rules not cover all detailed issues that were already prescribed by international conventions, including the Kyoto Convention. New rules on trade facilitation, if agreed to, will have to include the generally-raised issues such as simplification of official procedures and documents, automation and modernization of customs, introduction of Electronic Data Interface, improved transparency of domestic regulations, audit-based customs control, among others.

To summarize, the anti-dumping and TRIPs issues will have the most important effects on the Korean economy. Korea needs to make sure that the basic framework of the rules of origin and trade facilitation be set up to the benefit of Korean exporting enterprises. For the subsidies and countervailing measures and regional trade arrangements, Korea needs to play a bridging role in coordinating the conflicting interests of the developed and developing camps. Korea will have to review the priorities of rules area and decide its negotiation strategies.

This study aims at evaluating the economic effects of the liberalization of trade in services on the Korean economy. Among the various economic effects, it focused on spillover effects of services liberalization on other sectors including manufacturing.

The liberalization of services is presumed to bring productivity gains in the service sectors and also in the manufacturing sectors which use liberalized services as inputs. By examining the changes in productivity of the service and manufacturing subsectors in 1970-97, we found that liberalization may have positively contributed to the productivity of the liberalized service subsectors.

The total factor productivity in 'distribution, etc.,' as well as in 'transport and communications' which were liberalized since the mid-1990s improved in 1995-97. In contrast, 'finance, etc.,' which had been nearly closed until the late 1990s, showed negative total factor productivity growth rates throughout the periods studied.

Liberalization of trade in services is also presumed to have a positive impact on macroeconomic variables. Constructing some indices of restrictiveness of trade in each services subsectors, we simulated the effects of services liberalization using the Computable General Equilibrium (CGE) model. The results show that liberalization of trade in services in Korea since the Uruguay Round increases real GDP by 0.79 percent. The consumer price index falls by 1.41 percent. Above all, welfare gain to consumers is a 1.91 percent increase in the total utility. Liberalization of trade in services also increases investment and employment in the manufacturing sector, especially in textile and clothing as well as petroleum and coal.

Considering these positive effects of liberalization of trade in services on the domestic economy, it is in the interest of the Korean economy to continue the liberalization process and refrain from retreating. As entry barriers have been widely removed, most remaining obstacles are the internal barriers faced by both foreign and domestic suppliers. Removing these barriers is more complex because they are part operating practices, part regulation and part cultural.

In particular, the ambiguous tax laws as well as cumbersome regulations are regarded as the most serious impediment to foreign investors. This implies that deregulation should focus not only on reducing the number of regulations but also on enhancing transparent enforcement. In the process of deregulation, the government should also be attentive to reducing the excessiveness of regulations for fulfilling their objectives.

Another important area which has not been adequately addressed is labor market inflexibility. The limitations on layoffs may discourage foreign service suppliers from establishing local subsidiaries, which otherwise can create employment. Establishing an adequate social safety net and effective retraining programs is thus needed not only because it enhances labor market flexibility but also because it enables the government to liberalize mode 4---temporary entry of service providers.

A CGE Analysis of the WTO New Round Market Access Negotiations in Merchandise Trade Based on the Six Scenarios and Korea's Negotiation StrategiesNakgyoon Choi· Myung Heon Lee·Moon Bae Joo

The possible approaches to the WTO market access negotiations in merchandise trade are expected to be the following: (i) an across-the-board cut, (ii) formula approaches including the Swiss formula and the EU tariff harmonization formula, (iii) request and offer, and (iv) zero for zero.

This study sets up the CGE (Computable General Equilibrium) model, analyzing the economic impact of multilateral tariff reductions based on the six possible scenarios. The CGE model covers 8 countries (Korea, USA, Japan, the European Union, Canada, China, ASEAN, rest of the world) and ten industries (agriculture, forestry and fishing, mining, food and beverage, textile and clothing, petrochemicals, steel, electronics and machinery, transport equipment, other manufacturing, services).

The simulation results reveal that Korea, China, ASEAN and Japan will be the winners in the market access areas if the tariff peaks as well as the nuisance tariffs are eliminated in the WTO New Round. The results also indicate that: (i) the Swiss formula to set a to be 10, and (ii) the tariff harmonization to eliminate the international tariff peaks as well as the nuisance tariffs below 3 % will be the best alternatives for the Korean economy.

In this context, the Korean government will be expected to make its best efforts in the WTO's decision-making processes concerning tariff reduction techniques, on which WTO Members economic interests will heavily depend. It will be urgently necessary that WTO Members cooperate with each other to make sure that the target of market access negotiations be the reduction of the average tariff rate, elimination of the tariff peaks and the alleviation of the tariff escalation system. For its part, Korea will have to prepare to revise its domestic nontariff as well as tariff systems. In addition, the Korean government will have to expand domestic support for trade and investment liberalization because the WTO New Round will substantially affect various domestic interest groups.

The Prospects for the WTO New Round Negotiations and Schemes for Improvement of Koreas' Negotiation Stance Wook Chae·Nakgyoon Choi The expectation of a successful launch of the New Round came to a halt due to disagreement of related parties at the Seattle Ministerial Conference(Nov. 30 - Dec. 3, 1999). The efforts to facilitate the initiative of the New Round by WTO and individual members have not yet materialized. As of now, it is expected that the New Round will come to the picture once the fourth WTO Ministerial Conference is held in late 2001. However, it should be noted that the launch of the New Round near the end of 2001 is plausible only under the premise that the gap in interests among the WTO member countries are narrowed. (The rest is omitted.)