The study examines methodologies for quantitatively analyzing the impact of global supply chain fragmentation and applies these approaches to scenarios involving critical minerals. It identifies two primary analytical approaches: microeconomic and macroeconomic.

Microeconomic methods provide detailed insights at the item or firm level but face challenges due to limited access to specific supply chain data. Macroeconomic methods, while suitable for industry- or national-level analysis, often rely on unrealistic assumptions when applied to item-level fragmentation. Despite the significant macroeconomic effects of disruptions in critical supply chains, existing item-level analysis techniques struggle to capture these impacts accurately. For instance, efforts to link item-level analysis with GDP using linear programming or inoperability input-output analysis often encounter limitations due to rigid assumptions about input-output structures. High-tech items, in particular, pose challenges due to their complex supply chain interdependencies and their significant influence on final production.

To address these issues, the study proposes an integrated methodology combining machine learning techniques for microeconomic analysis with the OECD METRO model for macroeconomic evaluation. This approach considers key issues and transmission channels identified in previous research. The study also reviews critical mineral management policies in major economies such as the United States, European Union, China, and Korea. The United States identifies critical minerals essential for economic and national security through legislative measures like the 2020 Energy Act and has implemented strategies to strengthen North American supply chain resilience. The European Union has updated its critical raw materials list every three years since 2008 and enacted the Critical Raw Materials Act in 2024 to expand production capacity and enhance international cooperation. China, despite lacking a clear legal definition of critical minerals, strengthens its resource management through export controls and cooperation with resource-rich countries. Korea designated 33 minerals as critical through its 2023 Critical Minerals Securing Strategy, prioritizing 10 strategic minerals essential for industries like electric vehicles and semiconductors. However, Korea’s reliance on imports for most critical minerals highlights its vulnerability.

The study conducts a vulnerability analysis of Korea’s critical mineral supply chains using indicators such as the Trade Specialization Index (TSI) and Herfindahl-Hirschman Index (HHI). It identifies high global supply chain concentration in minerals like cobalt, lithium, and neodymium, which are crucial for secondary batteries and electric vehicles. To assess geopolitical risks, it examines import trends from China across seven countries from 2017 to 2023. Sharp declines in imports of gallium, graphite, and rare earth elements suggest potential disruptions due to trade conflicts or export controls.

The study employs a Dual-Stage Attention-Based Recurrent Neural Network (DA-RNN) model to predict the impact of critical mineral fragmentation on Korea’s exports of key items like batteries and semiconductors under three scenarios involving germanium, graphite, and rare earth elements. The results show significant decreases in export values across all scenarios. For example, restrictions on germanium imports led to a 3.9% decline in battery exports, while rare earth element shortages caused a 10.8% drop.

Using the OECD METRO model, the study evaluates the macroeconomic impact of critical mineral fragmentation under two approaches: direct analysis of import disruptions (Approach 1) and integration of microeconomic results into macroeconomic simulations (Approach 2). The findings indicate that germanium fragmentation could reduce Korea’s real GDP by 0.15%, while graphite and rare earth element disruptions could lead to decreases of 0.14% and 0.89%, respectively.

Based on these findings, the study recommends strengthening supply chain monitoring systems by integrating fragmented platforms across government agencies and establishing a centralized control tower. It also suggests diversifying procurement strategies, promoting R&D for substitute materials, and supporting SMEs through digital-based supply chain management platforms. Additionally, it emphasizes harmonizing policies with major economies to prevent over-securitization and redundant investments while expanding international cooperation for joint mineral exploration and development projects.

Korea and Japan normalized diplomatic relations with the signing of the Treaty on Basic Relations on June 22, 1965. In 2025, the two nations mark the 60th anniversary of this normalization. Over the decades, both countries have developed their relationship through active exchanges and cooperation in politics, economics, society, and culture, underpinned by the shared values of liberal democracy and a market economy. However, historical disputes—such as the issues of wartime “comfort women” and forced labor, visits by Japanese officials to the Yasukuni Shrine, and territorial disputes over Dokdo (Takeshima in Japan)—remain unresolved. These tensions continue to negatively affect broader cooperation.

Against this backdrop, this study focuses on envisioning a future- oriented relationship. This concept emphasizes overcoming historical entanglements that hinder progress on cooperative agendas. By considering changing circumstances surrounding bilateral ties, it presents a long-term vision for Korea–Japan relations looking toward 2050, based on comprehensive analysis across various fields.

1. Diplomacy and Security: Future Vision 2050

Korea and Japan must establish themselves as responsible partners in defending democracy and a rules-based order, while jointly shaping a regional multilateral security architecture. In the context of U.S.–China strategic competition, both countries should take on proactive roles as designers of world order working to prevent war. Key measures include: Building early warning systems, Enhancing operational information- sharing technologies, Expanding public diplomacy for mutual understanding, and Strengthening trilateral Korea–U.S.–Japan cooperation to ensure sustained constructive U.S. engagement.

Looking ahead, if conditions emerge for North Korea to rejoin the international community and pursue economic development, Korea must already have a clear mid- to long-term strategy of proactive engagement. Japan’s role would be critical in this process. Coordinated engagement by Seoul and Tokyo would benefit both countries, requiring the establishment of a cooperative framework. Proposals include creating a Northeast Asia Development Bank to support North Korea’s reform, opening, and infrastructure development, serving as an institutional framework to manage the involvement of multiple state actors.

On energy and climate issues, Korea and Japan should deepen cooperation to strengthen energy security and respond to the climate crisis. This includes joint LNG procurement and stockpiling systems, collaboration on Alaska LNG projects, and nuclear cooperation such as securing enriched uranium supplies. Strategies proposed are: Establishing a high-level intergovernmental dialogue, Creating joint investment and information-sharing platforms among private companies, Expanding next-generation talent exchanges, and Linking bilateral cooperation with regional/global initiatives such as ASEAN+3 and APEC.

2. Advanced Technology and Economic Cooperation

The study identifies humanoid robotics as a promising area for Korea–Japan collaboration, based on comparative analysis of long-term national strategies and mission-oriented R&D programs. A three-stage roadmap toward 2050 is proposed, covering both technological and market/ application cooperation. Such collaboration could not only solve social challenges and enhance global competitiveness but also serve as an innovative model spreading across Asia.

In the economic field, supply chain cooperation is a top priority. Both nations face vulnerabilities due to high external dependence on energy, food, and minerals. With similar levels of economic development and shared values, Seoul and Tokyo should institutionalize economic security and industrial cooperation, eventually pursuing binding trade agreements.

Financial cooperation is another priority. The two countries should extend or renegotiate the bilateral currency swap agreement, set to expire in March 2026, and expand its scale. A yen–won swap mechanism could also be used for trade settlements, broadening its utility.

The study highlights green economy cooperation, focusing on hydrogen and ammonia. By sharing a vision for carbon neutrality by 2050, the two governments can lay the groundwork for long-term cooperation. The situation calls for “practical” agendas to address shared challenges in realizing a hydrogen society.

In the blue (marine) economy, opportunities for cooperation include: Joint development of seabed resources (oil, gas, rare earths) and offshore wind expansion; Technology collaboration on smart ports, autonomous vessels, and maritime communication; and Building interoperable port automation systems and smart port networks.

The upcoming termination of the Korea–Japan Continental Shelf Agreement demands a long-term vision. Considering China’s persistent claims and global climate change, Seoul and Tokyo could explore turning this area into a trilateral (Korea–Japan–China) cooperation zone, or even a “Korea–Japan–China+U.S.” arrangement, in light of the U.S.–China strategic competition. Korea should take the initiative to make the Joint Development Zone (JDZ) a space for cooperation, not competition.

Finally, the study stresses the role of minilateral cooperation within platforms such as the RCEP and IPEF. Such arrangements can generate tangible outcomes despite limitations in bilateral institutionalization. Korea and Japan should use existing agreements strategically, strengthen RCEP-based Korea–Japan–ASEAN cooperation, and lead digital transformation initiatives. Proposals include: Leading discussions on rules of origin and carbon reduction in RCEP, Launching joint digital pilot projects, and Supporting ASEAN digital capacity-building.

3. Social Dimension and People-to-People Ties

Both Korea and Japan face demographic crises of ultra-low fertility, aging, and population decline, leading to regional extinction—i.e., the disappearance of local communities. Policies for 2050 must focus less on raising birth rates and more on structural adaptation. Cooperation could include policy exchanges, youth and startup collaboration, digital regional revitalization, and cultural-tourism projects.

The study emphasizes the central role of youth in shaping future relations. Exchanges through culture, travel, and social media have brought younger generations closer than ever. However, asymmetries exist: in 2024, two-thirds of bilateral visitors were Korean, and Korean participation in student and youth exchange programs far exceeded Japanese. Reducing this imbalance is key to fostering mutual understanding.

The role of the media is also crucial. Korean and Japanese media should move beyond sensationalism in reporting on historical and territorial disputes, providing balanced, context-rich coverage. To this end, proposals include creating a Korea–Japan Media Monitoring Committee and launching a joint “Future Journalism” program at leading universities of both countries.

For cultural industries, three proposals are made: Government cooperation to expand exports of cultural content, Joint measures against illegal overseas distribution, and Support for Korean startups entering the Japanese market.

4. Conclusion: Entering a New Era The year 2025 represents both reflection on the past 60 years and exploration of the next 60—effectively marking the first year of a new Korea–Japan era. Yet both countries face unstable political leadership and external pressures from “Trump 2.0,” with heightened tariff and alliance burden-sharing demands limiting space for long-term vision.

Nevertheless, bottom-up dynamics are favorable: public perceptions are more positive than ever, and the two economies are deeply intertwined. Both nations share a vital interest in defending openness and free trade amid global protectionism.

Therefore, the future vision must move beyond bilateral reconciliation, instead focusing on cooperative agendas that ensure the well-being, prosperity, and welfare of future generations. Despite domestic political risks and external challenges in 2025, the responsibility of the current generation to contribute to this vision is more urgent than ever.

Executive Summary

1. Introduction

2. The Model

3. Theoretical Results

4. Empirical Analysis

5. Conclusion

References

This paper examines how culture influences the success of fertility-control policies. In the 1970s, many developing countries implemented birth-control measures grounded in the quality-quantity trade-off, yet their outcomes diverged, e.g., Taiwan, Thailand, and South Korea achieved rapid fertility declines, while Pakistan, India, and Brazil did not. We propose that societal conformity—the degree to which individuals adhere to norms such as a government-endorsed ideal family size— determines how effectively policy incentives translate into behavior. Using a unified theoretical framework, we show that higher conformity amplifies the impact of birth-control policies on both reducing fertility and increasing investment in children’s education. Under empirically plausible conditions, this strengthened quality-quantity trade-off not only boosts short-run economic growth but also accelerates the shift from agriculture to manufacturing—measured by manufacturing’s employment share—even when manufacturing is more capital-intensive and benefits from human-capital-driven, labor-saving technologies. Finally, we validate these predictions with cross-country empirical evidence, underscoring the pivotal role of culture in shaping demographic change and economic development.

Together with the global expansion of projects to realize carbon neutrality, demand for key minerals—used as raw materials for renewable energy power generation such as solar panels and wind turbines, as well as for electric vehicles (batteries)—is rapidly increasing. One major concern is that China holds a dominant position across all stages of the global critical minerals supply chain, from mining (ore and concentrate) to refining and smelting (basic and processed metals), and recycling (scrap). In particular, China’s influence in the refining and smelting sector is overwhelming, and the nation also exerts significant control over the mining stage for certain minerals. In response, major countries including the United States, the EU, Japan, and the Korean government are strategically working to establish stable supply chains in this area, aiming to reduce reliance on China (de-Chinaization) and to transition energy structures towards decarbonization. Notably, although Korea is a major manufacturer in advanced industries such as electric vehicle batteries and semiconductors, its dependence on China for refined and processed products of critical minerals like lithium, cobalt, and nickel exceeds 70%, posing significant vulnerabilities in its supply chain.

China holds a dominant position as both a major supplier and consumer within the global critical minerals supply chain, but it exhibits various strengths and weaknesses at different stages. This study divides the supply chain into the stages of mining (ore and concentrate), refining and smelting (basic and processed metals), and recycling (scrap) to analyze China’s influence and vulnerabilities. It also examines strategies on the part of the Chinese government and enterprises to fortify their supply chains, drawing implications for Korea’s stable mineral procurement.

Chapter 2 of the study analyzes China’s control measures and vulnerabilities in the global critical minerals supply chain. While China firmly dominates the refining and smelting stages of the global critical minerals supply chain, it is relatively vulnerable in the mining stage. This is because, despite holding some advantages in ore deposits and production, China’s domestic industrial demand is not fully met, resulting in a high dependence on imported raw materials. Moreover, China has an industrial structure that imports basic raw materials for refining and smelting, meaning that as metal production increases, the demand for raw material imports also rises accordingly. Additionally, our analysis comprehensively considers mineral-specific (basic raw material) reserves, production volume, external dependence, and the Trade Specialization Index (TSI) to evaluate China’s strengths and weaknesses, linking these to the strategies China pursues. China mainly enforces export controls on Group 1 minerals—such as rare earth elements, gallium, and germanium—over which it holds an absolute advantage, using these controls as tools for economic pressure or strategic leverage. For instance, in response to US semiconductor equipment export controls against China, China banned exports of gallium and germanium to the US. For Group 2 minerals (those with advantages in reserves and production but insufficient to fully meet domestic demand), export control systems are also applied, but the focus here is more on domestic supply and demand management. For example, China has tightened export controls on antimony since 2019 to stabilize domestic supply amid internal shortages and growing demand for home appliances in 2024. Meanwhile, minerals classified as Group 3 (disadvantaged minerals) such as copper, aluminum (bauxite), lithium, cobalt, and nickel show high Chinese market shares at the refining stage but suffer from insufficient domestic reserves and production, leading to heavy reliance on overseas sources for raw materials. Copper and aluminum are widely used as base minerals, while lithium, cobalt, and nickel are essential for core industries like secondary battery cathode materials. Any disruption in the supply of these raw materials could impact China’s overall industrial sector. In response, China focuses on domestic resource development, securing overseas mines, and recycling to strengthen resource security and supply chain resilience.

Chapter 3 analyzes domestic mineral resource development and recycling strategies. In the area of domestic development, China strategically manages its mineral resources based on the Mineral Resources Law and the five-year National Mineral Resources Plan. In 2024, a comprehensive revision of the Mineral Resources Law was made to explicitly link resource security with national security, strengthening the legal foundation by introducing provisions for the stable acquisition of strategic minerals and supply chain stability. The National Mineral Resources Plan includes comprehensive strategies not only for domestic resource development but also for securing overseas resources, controlling protective minerals, and stockpiling. The plan (2016–2020) officially designated 24 strategic minerals. In particular, regarding domestic mineral resource exploration and development, various policies are in motion to promote exploration, innovate technologies, and foster mining industry clusters linked with related downstream industries. As of 2023, China’s investment in geological exploration and fixed assets in mining has increased for three consecutive years. Exploration investment has been focused on base minerals, but following policies to expand exploration of strategic minerals, new deposits of lithium, rare earths, and others have recently been discovered. Consequently, China’s global lithium reserves ranking rose from 6th to 2nd in the world. Additionally, China is expanding its influence in deep-sea resource development by securing exploration rights for gas hydrates in the South China Sea and polymetallic nodules in the international deep-sea CCZ (Clarion-Clipperton Zone) area.

In the area of resource circularity, China is actively promoting recycling policies to realize a circular economy and ensure the stable supply of critical minerals. The government plans to establish waste recycling systems (collection and sorting → pre-treatment → refining and recycling) in key sectors such as waste home appliances and spent batteries by 2025, and aims to standardize these systems by 2030. This nationwide system construction and standardization is led by the China Resources Recycling Group (CRRG). The CRRG provides comprehensive solutions by integrating functions such as acquiring and merging leading industry companies, waste collection, processing, distribution, and standard setting. As of April 2025, the CRRG has established nine subsidiaries focused on areas like spent battery recycling and non-ferrous metal recovery, integrating and standardizing the previously fragmented systems across these fields. In the recycling sector, spent electric vehicle batteries have emerged as a crucial means of securing key minerals such as lithium, nickel, and cobalt. Although China has not yet fully built institutional frameworks and standardized markets for spent battery recycling, it has adopted advanced policies faster than any other country and continuously optimizes its regulations through trial and error. Major companies like CATL have already established a closed-loop recycling system and are expanding their influence across the entire supply chain through cooperation with domestic and international automakers. Accordingly, by 2050, China is projected to maintain unparalleled dominance based on the world’s largest spent battery processing capacity, raw material supply, and technological capabilities.

Chapter 4 addresses China’s strategies for securing mineral resources overseas. The Chinese government identified the overseas acquisition of mineral resources as a key policy direction in the National Mineral Resources Plan (2016-2020). It pledged to mobilize various policy tools, including mining cooperation based on the Belt and Road Initiative (BRI), exploring joint investment models linking mining and infrastructure, establishing multilateral and bilateral cooperation platforms, supporting Chinese companies’ overseas mineral investments, and participating in global mining governance. Looking at global mineral (metal resource) investment trends since China officially launched the BRI in 2013, several points stand out. First, investment by private enterprises in metal resources has expanded significantly. Second, the primary investment regions have diversified from a previous focus on Australia to include Sub-Saharan Africa, South America, and East Asia. And third, while investments have continued to focus on base minerals, there has been a gradual increase in investments targeting critical metals such as lithium, nickel, cobalt, uranium, and niobium. Based on comprehensive support from the Chinese government, both state-owned and private enterprises have focused on securing base minerals (iron, copper, aluminum) and critical metals (lithium, nickel, cobalt, uranium, niobium) primarily in Sub-Saharan Africa, South America, and East Asia—key regions for China’s mineral supply. All the major minerals secured overseas by China belong to its group of disadvantaged minerals (i.e., those in which China is relatively weaker domestically). While every country secures its disadvantaged minerals through key supplying nations, China is particularly threatening because it invests aggressively enough to gain control over production within supplying countries. For example, in the Democratic Republic of Congo—where about 70% of the world’s cobalt ore production (with over 50% of global reserves) is concentrated—Chinese companies currently account for over 40% of cobalt ore production. Similarly, in Indonesia, which holds 42.3% of nickel ore reserves, 50% of mining production, and 42% of refining production, Chinese companies are estimated to control about 75% of nickel refining capacity. In other words, China has not only strengthened the raw material stages (ore mining and refining) of critical minerals such as cobalt and nickel—previously its weak links—but has substantially overcome these vulnerabilities. Examining the strategies behind these achievements, first, China has built multi-layered cooperation platforms (region-state, state-to-state) with key mineral-supplying countries in Sub-Saharan Africa, South America, and East Asia, creating long-term negotiation mechanisms with local governments and conducting regular consultations. Second, China established regional funds to provide large-scale financial support (indirect financing) for domestic state-owned and private companies investing locally. Third, it has developed mineral production and processing facilities within key countries to strengthen localization capabilities.

Chapter 5 analyzes China’s export control strategies. China established its legislative plan for the Export Control Law in 2016 and began its enforcement on December 1, 2020. Subsequently, in 2024, China enacted the Regulations on the Export Control of Dual-Use Items and announced the List of Export and Import Administration for Dual-Use Items and Technologies, thereby strengthening its export control legal framework. We evaluate this as indicating China has established a complete legal foundation before the inauguration of the new US administration (Trump’s second term). Since the enforcement of the Export Control Law, China designated key mineral resources as dual-use items to reinforce resource security and, from 2023 onward, has actively used export controls on advantageous mineral resources as a strategic response card. In retaliation to US semiconductor equipment export controls, China restricted exports of major minerals such as gallium and germanium. On December 3, 2024, China implemented export bans specifically targeting the US on dual-use minerals including gallium, germanium, and antimony for the first time. Between 2023 and 2024, China implemented export controls citing the need to protect national security and interests. Some minerals, such as graphite and antimony, were controlled to address internal supply issues and to adjust the list of temporarily controlled items. However, after the inauguration of Trump’s second term in 2025, China escalated the weaponization of mineral resources more explicitly, enacting export control measures immediately upon announcement and clearly signaling these as pressure tactics against the US. For example, the export controls on seven types of Chinese rare earths directly pressured the US defense industry, a move publicly emphasized by Chinese media. Minerals designated as dual-use export control items by China generally correspond to strategic minerals in which China holds a reserve and production advantage, and many have already been designated or are expected to be listed. Coming into 2025, we see a tendency to convert minerals previously on the export licensing management list (e.g., titanium, molybdenum) into dual-use controlled items, or to expand the range of controlled items among existing controlled minerals (e.g., tungsten, rare earths). Controls have also been strengthened on minerals included in the dual-use control lists of other countries, such as indium, molybdenum, and bismuth. Going forward, additional minerals such as vanadium, fluorite (rare earth elements not yet controlled), magnesium (with an expanded control list), beryllium, and aluminum are highly likely to be added to the control list. Regarding the export trends of minerals designated as dual-use export control items between 2023 and 2024, such as graphite and antimony, China has sharply reduced exports of basic raw materials (ore and concentrate) while increasing exports of refined metals and processed metals with higher added value. This strategy is evaluated as an effort to maximize national benefits by shrinking exports of raw materials—whose end users and purposes are difficult to track due to multiple processing stages—and expanding exports of higher value-added finished products.

Chapter 6 proposes the following response measures for the Korean government and companies based on the aforementioned analysis: Since Korea lacks deep-sea mining technology and experience, cooperation with technologically advanced countries such as the United States is necessary. Korea should also actively participate in establishing rational mining regulations that consider environmental protection to secure deep-sea resources. Korea needs to secure competitiveness in the battery recycling industry through a private-sector-led ecosystem construction complemented by institutional support from the government. Cooperation with Chinese companies in refining and smelting within major mineral supplying countries is essential. Regarding minerals such as fluorite and magnesium, which China is likely to attempt to control exports of in the future, the Korean government and companies need to proactively prepare by adjusting stockpiles and diversifying import sources. As China is expected to expand export controls not only on minerals themselves but also on refining and smelting technologies, it is urgent to promote cooperation with countries that have similar demands in refining and smelting sectors.

Empowering women and achieving gender equality are not just moral imperatives-they are global development goals. As one of the United Nations’ Sustainable Development Goals (SDG 5), the issue of gender equality has long been a key priority on ASEAN’s agenda. Since the 1988 Declaration on the Advancement of Women, and more recently through the 2022 Declaration on Promoting Women Entrepreneurship and the ASEAN Community Vision 2025, ASEAN has reaffirmed its commitment to women’s empowerment. Despite the growth in female labor force participation, women remain underrepresented in leadership roles in both business and politics across the region.

Interestingly, ASEAN has a relatively high share of female-led firms compared to other regions-but here is the paradox: their performance, measured in labor productivity, tends to fall below the overall average, and even more so compared to other regions. That raised a critical question: Can digital quotient, as a measure of firms’ familiarity with and engagement in digital technologies, help close this productivity gap?

This study offers both quantitative and qualitative evidence in response. In Chapter 2, we conduct descriptive and econometric analyses using World Bank data-including Gender Statistics; Women, Business and the Law; and the Enterprise Surveys-focused on Indonesia, Philippines, and Vietnam. The data reveal that male workers are generally more active and stable in economic participation. Male managers have greater access to digital and financial tools. Firms with digital engagement (i.e., having a website or using social media) report higher sales, while female-led firms show lower sales. Notably, female-led firms that are digitally active outperform their non-digital counterparts-offering a hint that digital quotient might be part of the solution. We go on to detail the empirical modeling using the World Bank Enterprise Survey to estimate labor productivity. A Cobb–Douglas production function is specified, with digital quotient and female leadership as key variables. OLS and quantile regressions show a significant negative association between female leadership and labor productivity, and a significant positive association between digital quotient and labor productivity. Importantly, the coefficient on digital quotient is large enough to offset the negative effect of female leadership in some contexts. However, the interaction term between digital quotient and female leadership is not statistically significant-suggesting that digital quotient may compensate for, but not amplify, labor productivity in female-led firms. Robustness checks using winsorized data, and propensity score matching confirm these results.

In Chapter 3, we turn to real-world voices-via expert consultations and interviews with business leaders-to understand how digital quotient affects female-led firms. Motivations for digitalization ranged from surviving the COVID-19 downturn to expanding sales and strengthening innovation. Many firms relied on support from governments, NGOs, and donor programs. Most leveraged social media and e-commerce platforms, reporting increased sales, wider product portfolios, and better customer engagement. However, digital quotient was also associated with certain challenges, including technical issues, cybersecurity risks, and even unintended shifts in business models.

Finally, this study offers policy implications tailored for ASEAN. Governments should promote digital literacy and quotient, support inclusive digital tools, and amplify success stories to inspire others. Regional efforts should aim to build localized digital quotient indicators and foster programs that reflect ASEAN’s unique entrepreneurial landscape.

Executive Summary

1. Introduction

2. Descriptive Facts

3. Gravity Models of International Migration

4. Empirical Analysis

5. Robustness Checks

6. Conclusion References

In recent decades, European Union (EU) enlargement has substantially altered the continent’s economic and political landscape by lowering barriers to trade, labor mobility, and capital flows. Migration emerges as a central factor in this transformation, especially following the accession of Central and Eastern European countries. This enlargement has intensified interest among policymakers and researchers in the factors driving intra-European migration and its economic and social implications.

This study specifically investigates the interplay between EU enlargement, the Freedom of Movement (FOM) agreements, and Brexit on labor mobility. Although EU enlargement has generally been associated with deeper economic and political integration, its most profound impact may lie in facilitating international migration. By distinguishing between the timing and impact of EU membership and the Freedom of Movement (FOM) agreements—often introduced at different times— the analysis provides a nuanced view of their respective roles.

Employing a gravity model framework with Poisson Pseudo-Maximum Likelihood (PPML) estimation and a heterogeneity-robust difference-in-differences (DiD) approach, this study examines bilateral migration flows across 224 origin-destination country pairs. The results reveal that EU membership significantly increases migration flows, particularly from newer to older member states, indicating a pronounced east-to-west asymmetry. This effect remains robust after accounting for FOM implementation, and further robustness checks confirm the consistency of the findings under different policy timelines and the inclusion of external mobility agreements.

Additionally, the study explores the impact of Brexit on return migration, uncovering a substantial rise in flows from the UK to EU member countries—especially those that joined after 2000—following the 2016 referendum. These patterns highlight the heterogeneous and asymmetric effects of different EU migration policies and suggest that Brexit exerts a stronger influence on return migration than FOM.

Consequently, the findings highlight the importance of policy-specific analysis in capturing the complexities of migration responses to institutional changes within the EU.

As the competition for technological hegemony intensifies between the U.S. and China, major advanced countries around the world, including the U.S., are increasingly strengthening their strategies to protect and foster their technologies and industries in core science and technology fields. The governments of individual countries are expanding R&D investment, reorganizing legal and institutional foundations for technology protection and fostering, and aiming to strengthen national security and industrial ecosystems as well as securing technological competitiveness.

Major advanced economies, such as the U.S., the UK, and the EU, are formulating sophisticated policy frameworks aimed at promoting the growth of core science and technology fields. These frameworks involve easing unnecessary regulations while introducing new measures to safeguard critical technologies. Accordingly, it is essential to conduct a comparative analysis of these countries’ strategies for science and technology development, their approaches to fostering innovation ecosystems, and their industrial policy directions by examining the legal, institutional, and policy innovation strategies in major advanced countries.

Amid intensifying competition for technological hegemony between advanced countries, each country is focusing on securing technological independence and sustainability. The U.S. is intensively fostering high-tech industries such as semiconductors, AI, quantum technology, and biotechnology through its “America First” strategy, and is also restricting foreign investment and controlling technology transfer. The UK is strengthening its strategic choices to overcome the problem of low economic growth following Brexit and improve the UK’s global competitiveness in core technologies, while pursuing R&D investment and regulatory reform in fields such as AI and quantum technology. The EU is working to convert its technological innovation policy, which used to be centered on individual member states, into a more common strategy at the EU level, and is carrying out large-scale R&D investment and regulatory reform to secure the EU’s global competitiveness.

In addition, China has made science and technology independence its top priority in the face of U.S. countermeasures and is accelerating its own technology development in fields such as semiconductors, space-technology, biotechnology, and high-tech manufacturing. As such, major advanced countries are implementing strategic policies to strengthen their technological sovereignty and secure leadership in the global technology competition, underscoring the need for Korea to respond quickly and systematically. Korea also needs a strategic approach to respond to the intensifying global competition in technology, particularly by overcoming the limitations of existing systems and by innovating regulatory reforms tailored to the evolving technological landscape. There is a growing demand for the need to remove institutional barriers that hinder the development of science and technology and to establish a flexible regulatory framework that can accommodate new emerging technologies. In particular, as the perception that regulatory innovation is directly connected to national competitiveness spreads, now is the time for Korea to take active policy measures in response.

In the fields of science and technology, changes in the R&D, production, delivery, and transaction methods of new technologies are leading to conflicts with existing laws and systems, as well as the emergence of new regulatory issues. The phenomenon of “regulatory delay”—caused by the absence of appropriate laws or regulatory gaps—is becoming increasingly severe, posing obstacles to the commercialization of new technologies by companies and research institutions. To address this, major advanced countries are making continuous and focused efforts to promote regulatory innovation. Analyzing these strategies can help us better understand how regulatory innovation is being implemented in the fields of science and technology in major advanced countries.

By investigating and analyzing the implications, promotion strategies, detailed focus areas, and key characteristics of regulatory innovation strategies pursued by major advanced countries to achieve global technological leadership and foster innovative growth in related industries, this study aims to present effective response strategies for Korea to prepare the rapidly evolving future regulatory environment in the fields of science and technology, through a multifaceted analysis of regulatory innovation strategies by areas—that has not been fully addressed in existing research areas.

The first step in investigating and analyzing regulatory innovation strategies in the fields of science and technology in major advanced countries is to select three advanced countries to be studied. The U.S. was selected for its leadership in science, technology, and industrial ecosystems, as well as its global influence on national regulatory innovation strategies. The UK was chosen for its pioneering role in regulatory innovation strategies in the fields of science and technology, and the EU was selected for its role in driving innovative demand in new industrial sectors. These three entities were identified as the major advanced economies to be included in the study.

The next step is to select some fields to be investigated among the various fields of science and technology. In 2024, the Ministry of Science and ICT announced three major game changer technologies (AI-semiconductor, advanced bio, quantum), on the basis of which a total of four science and technology fields were selected: semiconductors, advanced biotechnology, AI, and quantum technology.

The final step is to categorize various areas—such as institutions, governance, standards and certification, ethics, international cooperation, subsidies and tax incentives, experimental testing and scientific-technological capabilities, hostile response policies and strategies, and public/private protection (safety and security)—into three major groups; ① system and governance, ② Fostering and advancing the science and technology ecosystem and ③ technology security. Based on this classification, the study systematically analyzes the regulatory innovation strategies of major advanced countries in the fields of semiconductors, advanced biotechnology, AI, and quantum technology the perspective of these three categories.

Subsequently, the findings of major studies that have investigated and analyzed regulatory innovation strategies in core science and technology fields - such as semiconductors, advanced biotechnology, AI, and quantum technology in the U.S., UK, and EU are summarized as follows.

In the field of semiconductor, the three major advanced economies are working to promote semiconductor production and innovation within their borders, execute export control regulations, and respond to a supply-crisis caused by semiconductor shortages in order to protect their respective technological advantages. Each country is promoting innovative policies that include subsidies, tax incentives, and R&D policy funds in its innovative regulatory framework. The UK is strengthening its strategic choices to maintain and expand its strategic advantage in this sector based on its strengths in semiconductor design and intellectual property, compound semiconductors, and the world’s best research and innovation systems, with a relatively smaller amount of support than the U.S. and EU. In Korea, the so-called “K Chips Act” (amended by the Restriction of Special Taxation Act) was passed at the National Assembly plenary session in February 2025 to strengthen tax incentives for investment, such as the expansion of semiconductor companies’ factories. In addition, special laws for strengthening the competitiveness of the semiconductor industry and innovative growth are being discussed by the relevant committees of the National Assembly.

In the field of advanced biotechnology, the U.S. has been continuously implementing innovation policies to improve the regulatory environment through the Coordinated Framework for the Regulation, the federal government’s basic guidelines for regulating biotechnology products. The UK is pushing for the government’s smart regulatory program to remove regulatory barriers and prepare for the future of regulatory frameworks by explaining regulatory issues related to engineering biology through RHC(Regulatory Horizons Council). In addition, the regulatory sandbox for engineering biology is being promoted through the EBRN. The EU is focusing on simplifying regulatory pathways through a series of measures to promote biotechnology and bio manufacturing in the EU, and is implementing measures to further promote the establishment of regulatory sandboxes to quickly launch them in the market. Korea has enacted and is currently implementing the Biotechnology Promotion Act, which aims to efficiently foster and develop biotechnology by establishing a solid research foundation and promoting the industrialization of biotechnological advancements. In January 2025, the National Bio Commission was launched, and the government unveiled the “Korea Bio Great Transformation National Strategy,” which aims to position Korea among the world’s top five biotechnology leaders by 2035 through sweeping transformations in infrastructure, R&D, and the bioindustry.

In the field of AI, although the US has long led the world in AI technology and scientific advancement, its AI regulatory framework only began to take full shape in 2024. That year, President Joe Biden issued a new executive order titled the “AI Executive Order on Safe AI.” This executive order establishes new standards for the safety and security of AI, protects privacy, promotes civil rights, fosters innovation, and introduces stronger regulations to prevent the misuse of AI.

The UK, through its National AI Strategy, has proposed short-, medium-, and long-term measures aimed at achieving three core priorities: investment in the AI ecosystem, ensuring that the benefits of AI are distributed across all sectors and regions, and establishing effective AI governance. Furthermore, to lead responsible innovation in artificial intelligence (AI) and maintain public trust in the technology, the UK became the first country in the world to publish an AI regulatory white paper titled A Pro-Innovation Approach to AI Regulation, which provides guidance on the use of AI. The UK government subsequently published a Government Response that compiled and addressed questions from various relevant institutions regarding the white paper, thereby presenting a foundational regulatory framework for AI. In addition, the UK is building its AI governance structure by establishing the world’s first government- supported AI Safety Institute and forming a Regulator Ecosystem composed of multiple regulatory bodies. The EU finally approved the “AI Act,” the world’s first comprehensive AI technology regulation, on May 21, 2024. The EU AI governance system has been established as a separate AI Board consisting of the EU Commission, its AI Office, and delegations from EU member states.

Recently, Korea became the second country in the world, following the European Union, to enact an “AI Basic Act,” which is scheduled to take effect in January 2026.

Korea’s AI Basic Act includes provisions for the establishment and implementation of a national AI master plan every three years, the formation of a national-level AI governance structure and support for the innovative development of the AI ecosystem through measures such as securing professional talent, designating AI industrial clusters, building AI testbeds, promoting AI data center policies, and facilitating international cooperation. The Act also addresses AI technology standardization, the establishment of ethical principles, the expansion of financial resources for AI industry promotion, and the prevention of AI-related risks, including administrative fines. It defines “high-impact AI” as a target for regulation and outlines obligations for transparency, safety assurance, and provider responsibility. However, generative AI is largely exempt from the major regulatory provisions.

The US has adopted a strategic and agile approach to AI governance by issuing sector-specific guidelines and recommendations, executive orders, and fostering collaboration with companies and research institutions. This allows for a rapid and flexible response to the fast-evolving AI landscape. Similarly, the UK is pursuing a pro-innovation and flexible regulatory approach, introducing measures to address the misuse of AI and establishing regulations tailored to specific AI use cases. In contrast, the European Union has implemented a risk-based regulatory framework that classifies AI systems into categories such as “unacceptable risk/high risk/limited risk/minimal risk.” It imposes explicit regulatory obligations on AI systems falling under the “unacceptable/high-risk” categories, and includes provisions for general-purpose AI models. Korea, for its part, defines “high-impact AI” and outlines obligations related to transparency, safety, and provider responsibility. However, generative AI remains largely outside the scope of major regulatory provisions.

In the field of quantum technology, the U.S. has developed a comprehensive and broad-based regulatory framework to maintain and develop global leadership. In particular, the U.S. seeks to enhance national security and economic competitiveness through a strategic regulatory framework for quantum research, development, and science and technology. The UK has outlined 13 Priority Actions under its National Quantum Strategy and established the Office for Quantum within the Department for Science, Innovation and Technology (DSIT), which regularly reports to the National Science and Technology Council chaired by the Prime Minister.

In February 2024, DSIT’s RHC released a report recommending a regulatory policy for nurturing the UK’s innovation-friendly quantum ecosystem. The report is based on four core principles—proportionality, adaptability, accountability, and balance—and was prompted by the growing need for proactive discussions on the timing, scope, and form of regulations to ensure stable investment and development in quantum technology. The RHC made 14 recommendations emphasizing the need to establish strong governance, including the development of a quantum technology regulatory framework and the need for a regulatory framework based on standards, guidelines, and responsible innovation practices. DSIT is working on ways to identify regulatory requirements in the future, such as conducting horizon scanning for future regulatory requirements and adjusting proportional regulatory initiatives.

The EU launched its Quantum Technology Flagship in 2018, following the issuance of its Quantum Manifesto in May 2016. This flagship initiative brings together research institutions, industry players, and public funding bodies to consolidate and expand Europe’s scientific leadership and excellence in quantum technologies.

In the Strategic Research and Industry Agenda (SRIA) 2030 roadmap, the EU emphasizes the need to develop independent capabilities in quantum technology development and production to secure global leadership, protect strategic interests, ensure autonomy, and strengthen security—while avoiding dependence on third countries. The EU aims to establish the world’s leading ecosystem that translates lab-scale research into mass production across various scientific and industrial applications. Moreover, the EU highlights the importance of leveraging the economic and societal potential of quantum technologies to strengthen its position as a global player in this transformative field, ultimately positioning Europe as the world’s “Quantum Valley.” Korea’s Quantum Technology Industry Act, along with the National Quantum Strategy and various quantum initiatives, represents a set of innovative policy measures aimed at establishing a research foundation for quantum’s science-technology and systematically fostering the quantum industry. These efforts reflect the pursuit of multi-faceted innovation strategies across the key domains identified in this study. However, concrete strategic initiatives focused on identifying regulatory challenges in the quantum science and technology sector and anticipating future regulatory environments remain limited.

As a strategic response to such regulatory innovation policies in advanced major countries, the following approaches can be considered.

First, it is necessary to establish governance that support innovation across the broader economy while providing recommendations on the prioritization of regulatory reform in alignment with the regulatory environment in the fields of science and technology. Next, it is essential to proactively establish systems and strategies for scanning anticipatively regulatory environments and requirements in the fields of science and technology, and to strengthen integrated regulatory approaches starting from the R&D stage. Next, it is important to establish robust regulatory frameworks for core fields of science and technology and to advance innovation strategies—such as large-scale financial support—in order to secure technological leadership and foster a resilient and competitive ecosystem.

Furthermore, there is an increasing need to enhance global cooperation strategies aimed at ensuring alignment and harmonization with international regulations, grounded in active participation in the development of global technical standards and regulatory frameworks. Additionally, enhancing regulatory sandbox systems in core fields of science and technology will be essential for promoting timely and flexible responses to technological innovation.

As a final consideration, the rapid advancement of technology is increasing the need to redesign anticipative regulatory innovation roadmaps in established fields, and the cycle of these rolling plans is expected to become shorter. It is also a time to initiate discussions on setting the cycle of these rolling plans, establishing clear procedures, and defining the legal basis for their implementation.

Since the onset of the U.S.-China trade dispute, economic tensions between the two countries have persisted, with the Biden administration maintaining a hardline stance on China. With the recent return of the Trump administration, a large-scale tariff war is once again anticipated, making thorough analysis and policy responses increasingly critical. This study examines the impact of the tariff war triggered by the U.S.-China trade dispute on the Korean economy, and derives policy implications based on the findings.

First, the U.S. tariff increases on Chinese goods have led to a decline in Korea’s exports to the U.S. and a reduction in imports from China, thereby reshaping trade flows. However, the strengthening of U.S. non-tariff barriers has increased Korea’s exports to the U.S., particularly in consumer goods, suggesting that Korea can play a crucial role as an alternative supplier. Consequently, the Korean government and businesses must diversify their markets beyond key trading partners by expanding into emerging markets such as Southeast Asia and Latin America to mitigate trade risks. To achieve this, the government and research institutions should systematically collect and analyze data on the economic, political, legal, and consumer trends of these emerging markets and provide relevant insights to businesses.

Furthermore, to diversify its export industries, Korea must enhance its manufacturing competitiveness and foster high-value-added industries. Given the complementary nature of Korea’s exports of industrial goods to the U.S. with those of China, an increase in U.S. tariffs on Chinese goods could potentially lead to a decline in Korea’s exports to the U.S. Therefore, Korea should diversify its export portfolio to include not only industrial goods such as semiconductors and machinery but also consumer goods, thereby mitigating the negative impact of trade disputes. To achieve this, Korea should continuously invest in research and development (R&D) to advance products and services while enhancing industrial processes through expanded investments in Fourth Industrial Revolution technologies and R&D. Additionally, policies should be implemented to support small and medium-sized enterprises (SMEs) by promoting technological innovation and providing tax incentives to strengthen overall industrial competitiveness.

Additionally, a systematic response to non-tariff barriers is required. Amid ongoing trade disputes and rising protectionism, non-tariff barriers have been reinforced alongside tariffs, often offsetting the effects of tariff policies. Thus, focusing solely on countering the negative effects of tariff measures may introduce unnecessary uncertainty, underscoring the need for a comprehensive response that also addresses non-tariff barriers. Accordingly, response strategies should take into account the simultaneous impact of systematic trade policies, including tariff and non-tariff measures. Moreover, a preemptive monitoring and early warning system should be established to continuously track trends in non-tariff barriers and enable swift policy responses.

Next, adjustments to foreign direct investment (FDI) strategies are necessary. Following U.S. tariff increases on Chinese goods, Korean multinational corporations (MNCs) have shown a tendency to increase their FDI in the U.S., a trend particularly evident among large enterprises. Meanwhile, although the number of subsidiaries of Korean MNCs operating in China has been declining—particularly among firms with higher import shares and heavily dependent on the global value chain—, the overall scale of FDI to China has not significantly decreased. This suggests that firms are reallocating their investments in China more efficiently. In particular, U.S. tariff measures on Chinese goods have created opportunities for Korean firms to expand their investments into third countries such as ASEAN, leading to increased FDI in this region. This trend reflects ASEAN’s advantages, including low production costs and strengthened connectivity with both the U.S. and Chinese markets, positioning it as an attractive alternative investment destination for Korean firms. Therefore, the Korean government should formulate policies to support the FDI strategies of Korean businesses while also considering measures to prevent the hollowing out of domestic industries.

Finally, ensuring flexible macroeconomic stability policies, including foreign exchange market and monetary policies, is crucial. Analyzing past U.S. trade policy shifts reveals that as U.S.-China trade conflicts intensified, trade policy uncertainty increased before tariff adjustments. This led to a depreciation of the Korean won against the U.S. dollar and heightened exchange rate volatility. The impact of trade policy uncertainty did not have a statistically significant effect on Korea’s key macroeconomic variables, as its influence on exports and imports was offset by the depreciation of the Korean won. However, U.S. tariff increases negatively affected Korea’s total production and dollar-denominated exports, partially explained by changes in the won-dollar exchange rate and price levels. Therefore, it is essential to ensure that Korea’s macroeconomic policies can respond more swiftly and flexibly. Coordination between monetary, fiscal, and foreign exchange policies should be strengthened to maintain economic stability.

In summary, changes in U.S.-China trade policy have significantly increased trade costs between the two countries, leading to reduced trade volumes and rising import costs, with substantial structural impacts on third-country economies, including Korea. Consequently, the Korean government and businesses must develop strategies to adapt flexibly to the evolving trade environment, followed by further research and policy discussions should continue. In particular, to minimize the negative impact of the prolonged U.S.-China trade dispute on Korea’s trade environment, more sophisticated trade policies should be formulated, and measures should be implemented to support Korean firms’ FDI strategies amid growing protectionist trends.

Additionally, policy support should be strengthened to enable Korean firms to respond flexibly to the restructuring of global value chains. Furthermore, institutional improvements are needed to enhance the speed and flexibility of macroeconomic policies, allowing for effective responses to exchange rate volatility amid increasing uncertainty in U.S. trade policy. Through these measures, Korea must establish a comprehensive strategy to ensure continued economic growth and competitiveness despite the U.S.-China trade conflict and shifts in U.S. trade policy with other countries.

In December 2023, the Houthi rebels in Yemen launched attacks on commercial vessels in the Red Sea, escalating the Israel-Hamas conflict into a broader geopolitical risk encompassing the Red Sea region. This development disrupted the logistics supply chain between Asia and Europe, which had previously relied heavily on the Suez Canal. As maritime routes shifted from the Suez Canal to the Cape of Good Hope, countries worldwide, including South Korea, faced increased shipping and insurance costs. This situation posed the dual challenges of weakened export competitiveness and rising inflation.Simultaneously, the Red Sea crisis underscored the need for alternative land and maritime logistics networks to ensure supply chain stability. This led to heightened international interest in establishing new logistics hubs. Notably, discussions surrounding the Indo-Middle East-Europe Economic Corridor (IMEC), announced at the 2023 G20 Summit, and the Development Road project, actively promoted by Turkiye and Iraq, gained traction following the Red Sea crisis. For South Korea, an export-driven economy, the continued geopolitical uncertainty around the Red Sea presents significant threats. Rising logistics costs and decreased reliability in maritime shipping could undermine export competitiveness. Consequently, there is an urgent need to explore alternatives beyond the Cape of Good Hope, including expanding overland logistics via China’s transcontinental high-speed rail.

This study aims to address two key questions: (1) What impact has the Red Sea crisis had on South Korea’s logistics network and trade? (2) What implications do the economic corridors, actively pursued by Western countries, India, the Middle East, and Turkiye, hold for South Korea in terms of supply chain connectivity and logistics hub development?

Chapter 2 focuses on the background of the Red Sea crisis and its impact on maritime logistics. The crisis began after the Houthi rebels declared solidarity with Hamas, launching attacks on key commercial vessels using a range of weapons. In response, major shipping companies diverted routes from the Suez Canal to the Cape of Good Hope, leading to increased transit times and costs. This shift has expected to contribute to global inflationary pressures. The crisis significantly reduced vessel traffic and cargo volumes through the Suez Canal and Bab-el-Mandeb Strait. Notably, shipping companies continue to prefer the Cape of Good Hope route, raising concerns that maritime trade through these chokepoints may not recover in the mid-to-long term. Major global ports also experienced temporary declines in vessel traffic and cargo volumes, with reductions lasting up to six months compared to the same period in the previous year. Focusing on South Korea’s external trade, the volume of trade with Europe declined from January to September 2024 compared to the previous year. In contrast, trade volumes with the U.S. remained relatively stable, indicating that the Red Sea crisis negatively impacted Korea-Europe trade beyond mere logistical delays. Key export items, including automobiles, electronics, chemicals, steel, and mineral fuels, all showed declines in the European market. Conversely, exports to North America and Asia increased, suggesting that South Korean companies may have diversified their export markets, considering the U.S., Oceania, and Asia as alternative destinations. While overall exports to the Middle East decreased, imports of mineral fuels, such as petroleum, rose, leading to an increase in trade volume. Considering the impact of the crisis on ports beyond Jeddah, such as Jebel Ali and Salalah near the Strait of Hormuz, the decline in exports to the Middle East appears to result more from changes in maritime logistics networks than from risk- averse corporate behavior.

Chapter 3 explores South Korea’s potential for logistics diversification, focusing on the Development Road and IMEC as alternative routes. Both corridors aim to reduce dependency on the Suez Canal. The Development Road project focuses on connecting Al-Faw Port in southern Iraq to Europe via Turkiye through highways and railways, driven primarily by the geopolitical interests of Iraq and Turkiye. In contrast, IMEC consists of an eastern corridor linking India with Gulf countries and a northern corridor connecting the Gulf with Europe. IMEC reflects broader global objectives, including countering China, maintaining the Arab-Israeli detente momentum, and facilitating the energy transition. A SWOT analysis of both corridors reveals that weaknesses and threats outweigh strengths and opportunities, suggesting low feasibility in the short term. External factors, such as interference from China, Iran, and ISIS, pose significant risks to both projects. Despite limited immediate incentives for South Korean participation, it is advisable for the government and businesses to actively consider engagement in these corridors. Diversifying logistics routes is crucial for managing geopolitical risks, especially given the potential for escalating instability in the Middle East. Furthermore, with the inauguration of a second Trump administration in the U.S., there may be increased pressure for South Korea to expand into new markets such as India and the Middle East. Participating in emerging economic corridors in the Middle East could also deepen Korea-Middle East economic relations by extending cooperation into manufacturing and logistics sectors.

Chapter 4 summarizes the research findings and proposes short- and long-term policy recommendations to enhance the resilience of South Korea’s maritime logistics industry. In the short term, the government should: (1) Develop public-private partnerships (PPP) and investment-driven projects for port construction and operations, and (2) Establish logistics cost support funds for small and medium-sized shippers to build new logistics networks and manage crises effectively. In the long term, participation strategies should differ based on each corridor’s characteristics. For IMEC, cooperation should focus on PPP models based on existing intergovernmental MOUs. In contrast, South Korea should pursue multinational consortiums and Official Development Assistance (ODA) initiatives for the Development Road project.

This study analyzed the impact of the Red Sea crisis on the global economy, South Korea’s maritime logistics, and trade from December 2023 to October 2024. The analysis primarily covered broad categories of goods and regions, lacking detailed assessments. Additionally, as the Development Road and IMEC are still in preliminary stages, their specific impacts on global and domestic logistics systems remain unassessed. Future in-depth studies are needed to address these limitations.

The acquisition of advanced artificial intelligence (AI) technologies has emerged as a critical determinant of national competitiveness in economic and military domains. Indicators of AI technological development at the national level reveal that the United States is currently leading the field, followed by China in second place. AI technological competitiveness between these two nations and other countries highlights a significant gap, underscoring the reality that global AI competition is predominantly centered on the U.S. and China.

As with other advanced technological fields, the competition between the U.S. and China in AI is driven by aspirations for global hegemony. Consequently, the policies of both nations aimed at fostering AI innovation and advancement are characterized by dual objectives: enhancing domestic industrial competitiveness and maximizing their influence in the international arena. In this context, it is crucial for latecomers countries in AI technology to examine how these two leading nations counterbalance each other and collaborate with emerging players on the global stage.

This study explores the strategic competition between the United States and China in developing and utilizing artificial intelligence (AI) technologies and seeks to identify policy directions in response. It focuses on three key areas where the two nations exert significant influence on the international stage: norms and governance, research collaboration, and technological standards. By analyzing how this strategic rivalry unfolds globally, the study aims to provide valuable insights to guide effective policy-making.

Chapters 2 and 3 analyze the AI strategies of the United States and China across three dimensions: domestic policy, international collaboration, and trade policy (export controls), along with their respective responses. The U.S. AI policy began in 2016 under the Obama administration with the establishment of the Subcommittee on Machine Learning and Artificial Intelligence under the National Science and Technology Council. Subsequent administrations -Trump and Biden- expanded AI-related policies across various government departments and agencies. These policies can be summarized as support for research and development, fostering a skilled workforce, adopting AI technologies in government operations, and ensuring the safety and reliability of AI systems.

On the international stage, the U.S. has worked to establish norms and governance frameworks for AI through multilateral cooperation, emphasizing trust, safety, human rights, democratic values, and ethics. Notably, its focus on human rights and democracy contrasts sharply with China’s approach to AI norms and governance discussions.

In the race to secure AI technological supremacy, the U.S.’s containment of China is most evident in its trade policies. Since the Trump administration, Chinese companies have been added to the export control entity list, and under the Biden administration, export controls on semiconductors essential for AI development have been implemented and intensified. These restrictions have progressively expanded to include chips, manufacturing equipment, production software, and high-bandwidth memory. Further measures, such as outbound investment regulations, are anticipated to strengthen these controls even more.

China’s AI development policies were first incorporated into the “13th Five-Year Plan” (2016~2020) and further articulated in the “Next Generation AI Development Plan” of 2017. Under these initiatives, China aims to become a global leader in all aspects of AI theory, technology, and application by 2030. To achieve this goal, policies have been implemented to nurture AI specialists (e.g., the “University AI Innovation Action Plan”) and establish pilot zones for AI technology demonstration and policy experimentation (e.g., “Next Generation AI Innovation Development Pilot Zones”). As the rivalry with the United States intensified, the “14th Five-Year Plan” (2021~2025) identified AI as a critical national technology. This plan supports next-generation AI research ("Science and Technology Innovation 2030 Project"), expands industrial applications (“AI Plus Action Plan”), strengthens data standardization and infrastructure (“Eastern Data, Western Computing Project”), and develops AI technical standards (“National AI Industry Comprehensive Standardization System Construction Guide”).

China’s regulatory approach to AI is characterized by strong data-driven controls, including broad authority for national security agencies over data, restrictions on cross-border data transfers, and limitations on the external transmission of personal information. However, recent challenges in the foreign investment and business environment have prompted adjustments toward easing some regulatory measures.

Amid escalating AI competition with the U.S., China has also sought to strengthen its domestic legal and ethical regulatory frameworks to secure leadership in AI governance. Like the U.S., China endeavors to shape global AI norms and governance agendas. Its strategic posture emphasizes concerns about advanced or small-group-led governance frameworks while advocating for cooperation to enhance the AI capabilities of developing countries and bridge the gap for mitigating global inequalities. Notably, at the “Belt and Road Forum for International Cooperation” in October 2023, China introduced the “Global AI Governance Initiative.” This initiative underscores the priority of national sovereignty when providing AI products and services to other countries and opposes monopolization of AI technology and fragmentation of global AI supply chains, reflecting a divergence from the U.S. approach to global AI governance.

Finally, China’s responses to U.S. export control measures are twofold: reciprocal actions and technological independence. Reciprocal actions include export controls on semiconductor materials such as gallium and germanium, while efforts for techonological independence focus on domestic production of frontier AI semiconductor, led by Huawei, and the establishment of semiconductor investment funds.

Chapters 4, 5, and 6 delve into key aspects of the U.S.-China AI rivalry on the global stage, including global discussions on norms and governance, research network, and competition over technology standardization.

Chapter 4 examines current discussions on AI norms and governance through various channels - multilateral discussions, bilateral and plurilateral negotiations, voluntary rules-setting by industy, and academic developments. Four key insights are derived as follows. First, as previously mentioned, the United States emphasizes freedom and human rights while strengthening its collaboration with the European Union as part of a strategy to counterbalance China. This approach is exemplified by the adoption in 2024 of the “Fundamental Agreement on AI, Human Rights, Democracy, and the Rule of Law,” the first binding multilateral treaty in the AI domain, led jointly by the U.S. and the EU.

Second, there are notable differences between the U.S. and the EU’s approaches regarding the level of AI norms and transparency requirements. These disparities create compliance challenges for U.S. AI companies with respect to EU regulations and pose potential friction in U.S.-EU bilateral cooperation.

Third, the establishment of international institutions for standard development and AI system monitoring, as suggested by the UN High-Level Advisory Body on AI, is unlikely to materialize, as such bodies may not adequately represent the national interests of the U.S. and China. However, major countries, including the EU, could act as intermediaries to influence policy changes from these AI superpowers.

Fourth, while the input of industry stakeholders and corporations is essential for setting global standards regarding AI risk assessment and accountability, the participation of academic experts is even more critical. Academic involvement ensures neutrality and objectivity in the process of establishing global AI norms and accountability standards.

Chapter 5 utilizes data from the Country Activity Tracker (CAT) published by the Center for Security and Emerging Technology (CSET) to analyze changes in research networks and centrality among major countries from 2013 to 2023. This analysis is based on metrics such as the number of AI research papers, citation counts, and co-authored papers across nations.

The findings reveal a significant decoupling in AI research between the United States and China starting in 2020, a trend that intensified following the U.S. export control policies. While the U.S. has reduced collaboration with China to maintain its dominance in AI technology, China has strengthened partnerships with other countries, including the United Kingdom, Australia, and Canada. Among these, the U.K. continues to collaborate with China, citing the latter’s strong research output and qualitative edge in AI publications. By 2023, countries such as the U.K., Australia, and Japan had more co-authored AI papers with China than with the U.S., whereas Canada and India produced more joint AI papers with the U.S. than with China. South Korea ranked seventh in the number of AI research papers but showed relatively low international collaboration and research network centrality. While Korea has a significant number of co-authored papers with both the U.S. and China, it lacks robust collaboration with like-minded countries such as the U.K., Germany, and Canada. This highlights the need for South Korea to strengthen multi-tiered international partnerships to enhance its position in global research networks.

Chapter 6 analyzes the strategic competition between the United States and China over AI technology standards using a theoretical model that depicts the standard selection process of third-country governments. This model, built on the characteristics of AI technologies that improve performance through data, yielded the following three key insights.

First, it has been found that standards based on the technology of companies with superior foundation AI models are more likely to be adopted as the standards of third countries. Second, as the gap between U.S. and Chinese AI technology standards widens, competition over standard-setting intensifies, making non-economic factors such as the political and security considerations of third countries critical in standard selection. Third, the higher the share of profits captured by digital platforms mediating AI services, the more likely it is that the standards of the country with a technological advantage will be adopted. For example, if U.S. Big Tech companies dominate digital platforms in a third country and serve as intermediaries for AI services, the government of that country is highly likely to implement standardization policies based on the technology of U.S. AI companies.

Chapter 7 concludes with four policy recommendations based on the findings discussed in the previous chapters. In the context of growing strategic competition over AI and the increasing importance of semiconductor supply chains, South Korea should leverage its HBM technology and global partnerships to solidify its leadership in the semiconductor sector while preventing the outflow of talent and critical technologies as well as promoting the semiconductor mega- cluster. At the same time, given the contrasting approaches of the U.S. and the EU —where the U.S. emphasizes a voluntary, safety-focused approach and the EU prioritizes high transparency and strict preemptive regulations, posing challenges for U.S. companies entering the EU market— South Korea has the opportunity to act as a mediator by proposing an alternative model for AI norms that balances the values of human rights protection and industrial application. To achieve this, South Korea should enact and implement its own AI laws, continuously improve its regulatory framework, and enhance its standing in the international community. Additionally, with strengthened security cooperation with the U.S. potentially disrupting research networks with China, South Korea should actively negotiate for enhanced AI technology collaboration with the U.S. to bolster domestic research capabilities while strategically collaborating with highly productive AI research hubs such as the U.K., Germany, and India to increase the centrality of its research networks. Fourth, South Korean manufacturing companies should develop strategies for AI technology standardization by leveraging product lines such as smartphones, home appliances, and connected cars, which can serve as platforms for AI services. At the same time, the government should ease regulations on data utilization and transfer to enhance the efficiency of collaborative AI service development and partnerships between domestic companies and leading global AI firms.