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Policy Reference
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Major Issues in WTO: Korean Perspective
Major issues in WTO: Korean perspective Kwanho Kim, Inbae Kim, Yoocheul Song, Hosaeng Rhee In chapter 1, the author considers 1997 WTO agreement on trade in financial sevices and finds out that, in the process of financial libera..
Kwanho Kim et al. Date 1998.05.02
Multilateral negotiationsDownloadContentSummaryMajor issues in WTO: Korean perspective Kwanho Kim, Inbae Kim, Yoocheul Song, Hosaeng Rhee
In chapter 1, the author considers 1997 WTO agreement on trade in financial sevices and finds out that, in the process of financial liberalization and financial market opening, it is vital that market principles are strictly applied. In spite of some side-effects, market principles must be maintained to ensure macroeconomic stability as well as prudential regulations of financial institutions. He emphasizes that the government's role in the financial liberalization must be confined to providing transparent policies and enforcing prudential regulations with consistency. Unnecessary intervention in financial institutions by the government will obstruct efficient resource allocation.
In chapter 2, the current WTO norms do not provide a clear answer as to whether environmental taxes imposed on inputs consumed in production processes can be adjusted at border. The author believes that it would be reasonable and plausible to modify related WTO rules so that environmental taxes on production inputs consumption of which causes global environmental problems such as climate change, should be allowed to be adjusted at the border. Considering the possible changes in related WTO rules, the author recommends that environmental taxes on inputs (especially energy) be introduced with gradually increasing tax rates according to a pre-determined time schedule. This would provide producers with economic incentive for developing environmentally-friendly production methods.
In chapter 3, the importance of the rules of origin (ROO) is growing in step with the strengthening of regionalism and globalization in production. However, the ROO in each country and trading bloc are different. As a result, the WTO decided to harmonize various ROO to make the common rules which confer the origin. The author considers the on-going issues in the WTO and tries to analyze the impact of the new ROO on Korean exports and industries.
In chapter 4, the current WTO Agreement contains provisions related to anti-competitive practices, though they are not comprehensive. The scope for non-violation disputes concerning competition policies is unclear at this stage. GATT Art. XXIII:1(b), especially the meaning of 'enforcement of measures' and 'reasonable expectation', needs to be clarified.
The first step to avoid unnecessary disputes related to competition policies is to identify and regulate private anti-competitive practices that are formed under the direct and indirect influences of the government.
In chapter 5, one of the most important decisions made at the first Ministerial Conference of the WTO in 1996 was the agreement to set up a working group on "trade and investment". Though the activities of the working group do not predetermine future directions, the process is likely to lead to negotiations and finally to an agreement on investment. Though the views of the developed and the developing countries often contrast, there is much room for convergence. This article examines the background and presents a view of possible future Multilateral Frameworks on Investment(MFIs). It also emphasizes the positive aspects of MFIs for the Korean economy.
In chapter 6, Regional trade agreements (RTAs) directly account for over 50% of world trade and this share will continue to grow. Not onlt is the number of RTAs growing, but the coverage of each RTA is broadening. In this context, Korea must actively participate in the WTO Committee on RTA (CRTA) to prevent discrimination against non-member countries. The author considers the meaning of WTO rules related to RTAs and trends in CRTA discussions in order to make the Korean standpoint in the CRTA. He also tries to find the new ways of rule making to make RTAs consistent with WTO multilateralism. -
Current Issues Surrounding Korea-Japan Trade Disputes and Policy Recommendations
Current Issues Surounding Korea-Japan Trade Disputes and Policy Recommendations Hoon Chung, Hongbea Lee Korea and Japan have run into trade disputes over the Japanese partial abolition of the Generalized System of Preference (GS..
Hoon Chung et al. Date 1998.05.01
Trade policyDownloadContentSummaryCurrent Issues Surounding Korea-Japan Trade Disputes and Policy Recommendations Hoon Chung, Hongbea Lee Korea and Japan have run into trade disputes over the Japanese partial abolition of the Generalized System of Preference (GSP), the Japanese safeguard system and the Korean import diversification system. With the introduction of the Japanese GSP in 1971, Korea became a second beneficiary country after China. However, after Korea joined the OECD in 1995, Japan insisted that Korea graduate from its GSP. As a result, trade disputes between the two countries grew more intense.
In 1995, Japan adopted a urgent import restriction measures as a safeguard against pork imported from Korea, and recently considered adopting this measure to other Korean agricultural goods. Korea claims that Japanese import restriction measures impose unduly high tariffs on Korean products relative to other trading partners.
Meanwhile, Japan has requested revision or abolition of Korea's import diversification system, which is targeted primarily at Japan and violates GATT codes. In accordance with the IMF program agreed to in December 1997, Korea decided to change the time schedule for abolishing the import diversification system from January 2000 to June 1999.
This paper provides four recommendations regarding Korea's trade policy with Japan, in light of the fact that Korea needs to implement sound and perspective trade policy in return for IMF aid.
First, in order to improve its trade deficit with Japan, Korea should look for ways to boost exports to Japan as much as possible, instead of reducing imports from Japan.
Second, to overcome its current shortage of foreign reserves, Korea should find ways to attract direct investment from Japan rather than injecting more the overseas investment into Japan.
Third, Korea should improve technology transfer from Japan to improve the quality of Korean products.
Finally, considering Japan's influence on the world economy, it is essential that both Korea and Japan substantially improve commercial relations. -
Economic Integration in the Americas and Implications for Korea
Economic Integration in the Americas and Implications for Korea Won-Ho Kim, Soo-yong Kim, Mi-kyung Yun, Kyung-Hee Lee In the Americas, there are several subregional trade arrangements protecting trade interests of their member co..
Won-Ho Kim et al. Date 1998.04.29
Economic integrationDownloadContentSummaryEconomic Integration in the Americas and Implications for Korea Won-Ho Kim, Soo-yong Kim, Mi-kyung Yun, Kyung-Hee Lee
In the Americas, there are several subregional trade arrangements protecting trade interests of their member countries and promoting investment and development in their subregions: Central American Common Market, Andean Group, Caribbean Community, Southern Corn Common Market(MERCOSUR) and North American Free Trade Agreement(NAFTA). Many blocs still remain short of complete customs union despite their names, but NAFTA and MERCOSUR among others are highly significant in the region, having led the continental integration with their economic sizes, solidarity, and institutional advancement.
Since December 1994, when 34 countries in the Americas agreed to create a Americas Free Trade Area(FTAA) by 2005, the possible impact of this on Korea's trade with the region has been discussed. This study finds little tangible evidence of trade diversion so far. This is probably because the share of trade with Latin America in Korea's total trade volume is relatively small, with inter-regional trade still being quite limited.
When the FTAA comes to be realized, however, and as Korea's trade with Latin America as well as with the United States and Canada grow, it will have a much greater impact on Korea. FTAA will become a much more powerful block than NAFTA, mostly because it is an integration scheme among developed countries, newly industrialized countries, and the underdeveloped nations, giving rise to great synergy effect, rarely seen in any other regional economic integration to date. Korea should be prepared for such a change in her trade environment, and be prepared before it is too late. Korean firms should broaden her production base in countries such as Brazil with large market size, and target Mexico in the North and Chile in the South as stable and strategic production bases.
Moreover, it is imperative for the Korean government to have a clear position with respect to its policy towards economic integration in the Americas. Since Korea has been supporting open regional integration through the APEC, Korea should strongly argue against any discriminatory actions in the case of the American regional integration as well. Further, Korea could suggest mutual participation among regional integration bodies as a way of monitoring discriminatory actions. In addition, direct policy response (ie, other than legal action through the WTO or mobilizing cooperation from other nations having similar interests as Korea with respect to economic integration in the Americas) such as seeking to establish a countervailing regional block or signing free trade agreements with countries in the Americas should also be seriously considered. -
Labor Management Problems of Foreign Companies in China and Recommendations for Improvement
Labor Management Problems of Foreign Companies in China and Recommendations for Improvement Hyunjun Cho Foreign companies investing in developing economies, often attracted by cheap labor costs, continue to face difficulties conc..
Hyunjun Cho Date 1998.04.29
DownloadContentSummaryLabor Management Problems of Foreign Companies in China and Recommendations for Improvement Hyunjun Cho Foreign companies investing in developing economies, often attracted by cheap labor costs, continue to face difficulties concerning labor management. This is especially true in China, where laws and regulations lack transparency and foreign-invested enterprises (FIEs) face many non-institutional barriers. Particularly in recent years, the Chinese government has clamped down on addressing FIE labor problems.
For Korean companies investing in China, which are predominantly in labor-intensive industries, labor management is a crucial factor influencing overall management. However, Korean-invested companies (KICs) in China have been facing great difficulties in managing labor problems, and in some cases failing as a result.
Causes, on management side, for KIC difficulties in labor management can be categorized as follows:
- When starting business, KICs tend to overemphasize matters such as remitting investment returns, paying local taxes, and procuring raw materials, while neglecting the importance of labor management.
- Most KICs lack skilled personnel and investment for appropriate labor management.
- KIC labor management methods are generally outdated, arbitrary, and inefficient.
- KICs fail to understand and adapt to local environments. In particular, many KICs mismanage costs by underestimating labor costs in China.
- Most KICs tend to disregard Chinese traditions, customs, and culture, and instead impose Korean-style labor management on local employees.
In order to solve such problems, KICs must first recognize that labor management is vital to determining efficiency of overall management. By adopting a comprehensive and systematic approach to labor management, KICs can strengthen their human and material resource bases. Finally, KICs should strive more towards understanding local environments and localizing labor management. -
Current Status and Policy Tasks to Promote Economic Relations between Korea and Russia
Current Status and Policy Tasks to Promote Economic Relations between Korea and Russia Yeocheon Jeong Russian economy is now being normalized after many years of severe depression and instability. Inspite of still existing instab..
Yeocheon Jeong Date 1998.04.22
Economic cooperationDownloadContentSummaryCurrent Status and Policy Tasks to Promote Economic Relations between Korea and Russia Yeocheon Jeong Russian economy is now being normalized after many years of severe depression and instability. Inspite of still existing instability factors such as serious budget deficit, major economic forecasting institutions are generally optimictic about the growth and development potential of Russian economy. Yet, vitalization of domestic investment wil be key to the full-scale economic growth of Russia.
Since 1990, as Korea and Russia established formal diplomatic ties, economic relations between the two countries has been increasing in diverse fields. Fast growth of bilateral trade, active participation of Korean fishing fleet in Russian waters, and introduction of Russian basic technologies and scientific knowledge into Korea are several outstanding examples. Nevertheless, based on the geographical closeness and the complementarity of industrial structure, Korea and Russia could have developed much more for bilateral economic relations. The most important obstacle to promoting Korean-Russian economic relations has been, so far, the political and economic instability of Russia, and, following from this, lack of institutional infrastructure to promote international economic transaction. However, attitutes of Korean firms pursuing only short term benefit, and their insufficient information and knowledge on Russia and Russian market were also great impediments.
As Russian economy is normalizing, the results of economic reform are getting visible, and, therefore, conditions for economic cooperation with Russia are turing to be better, crisis of Korean economy since end of 1997 is providing an unfavorable situation this time. However, in order to overcome economic crisis, it is necessary for Korea to increase export to such a huge growing market like Russia, and to introduce low-priced, but excellent basic technologies and scientific knowledges from Russia. Futhermore, to vitalize economic relations between Korea and Russia, it is desirable for Korean and Russian governments to hold "Korean-Russian Joint Committee on Economy and Science-Technology" every year regularly. -
The Current Status and Prospects of the Economic Relationship between North Korea and China
The Current Status and Prospects of the Economic Relationship between North Korea and China Myongchul Cho The collapse of the Soviet Union and East European Socialist States caused major economic difficulty to North Korea, which ..
Myoungchul Cho Date 1998.04.17
Economic cooperationDownloadContentSummaryThe Current Status and Prospects of the Economic Relationship between North Korea and China Myongchul Cho
The collapse of the Soviet Union and East European Socialist States caused major economic difficulty to North Korea, which depended heavily on these economies. In the midst of the economic difficulty, the economic relationship between North Korea and China further strengthened, resulting in greater influence of China in North Korean economy.
In this study, we look at the economic relationship between North Korea and China with a focus on the trade flows and the economic cooperation between them. In the process, we look at the future of the relationship between North Korea and China and derive a new implication for South Korea's policy forwards the region. -
Changing Patterns of East Asia's Trade and Direct Investment and A Policy Agenda
Changing Patterns of East Asia's Trade and Direct Investment and A Policy Agenda Namdoo Kim, Yongkul Won, Chaiwook Chun, Hoon Chung Over the past 30 years, East Asia has experienced unprecedented high economic growth, and emerged..
Namdoo Kim et al. Date 1998.04.14
Trade structure, Overseas direct investmentDownloadContentSummaryChanging Patterns of East Asia's Trade and Direct Investment and A Policy Agenda Namdoo Kim, Yongkul Won, Chaiwook Chun, Hoon Chung Over the past 30 years, East Asia has experienced unprecedented high economic growth, and emerged as one of the three pillars of the world economy along with North America and Europe. Recognizing the importance of trade and foreign direct investment in the process of East Asia's economic growth, this study examines the ever changing patterns of trade and foreign direct investment, and proposes a policy agenda to promote economic cooperation in the region.
To this end, this study analyzes several trade-related indexes, such as intra-regional trade, trade intensity, intra-industry trade, market comparative advantage, and export similarity. In addition, trends in foreign direct investment into the region are examined. These analyses reveal that East Asian economies are becoming functionally integrated through intra-regional trade and direct investment, and that not only competition but also interdependence among East Asian economies intensifies. Evaluating future prospects and policy directions for East Asian economies, this study emphasizes the increasing need for Korea to promote intra-regional economic cooperation. -
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The Rise of the Chinese Economy and Implications for Korea
The Rise of the Chinese Economy and Implications for Korea Chang-jae Lee, Chai-wook Chun, Hyun-jun Cho The Chinese economy is expected to mature into one of the largest economies in the world in the 21st century. It is likely to ..
Chang-Jae Lee et al. Date 1998.04.10
Economic opening, Economic reformDownloadContentSummaryThe Rise of the Chinese Economy and Implications for Korea Chang-jae Lee, Chai-wook Chun, Hyun-jun Cho
The Chinese economy is expected to mature into one of the largest economies in the world in the 21st century. It is likely to grow by 6 7 percent per annum for the next 20 years. This moderately optimistic estimate is mainly based upon specific characteristics of China. China, for example, with a large population and vast territory, can maintain its growth potential by utilizing the existing regional differentials in developmental stage, and it can also sustain a high growth rate despite deterioration of the external environment by depending upon growth in domestic consumption.
The rise of the Chinese economy will present both an enormous challenge and a great opportunity to the Korean economy. Should Korea fail to restructure its economy in time, Korean goods will lose their market shares in the international markets to increasingly competitive Chinese goods. However, if Korea succeeds in its economic restructuring and deepening of its economic relations with China, the Chinese economy will provide Korean firms with a rapidly growing market and diverse investment opportunities. -
The Political Economy of Korea-U.S. Trade Conflict: Developments and Challenges
The Political Economy of Korea-U.S. Trade Conflict：Developments and Challenges Yunjong Wang, Suyeob Na The Korea-U.S. trade conflict has centered on to what extent Korea would accept U.S. pressure for a market opening. Despite a..
Yun-Jong Wang et al. Date 1998.04.07
Trade disputeDownloadContentSummaryThe Political Economy of Korea-U.S. Trade Conflict：Developments and Challenges Yunjong Wang, Suyeob Na
The Korea-U.S. trade conflict has centered on to what extent Korea would accept U.S. pressure for a market opening. Despite a persistent trade surplus with Korea since the mid-1990s, the United States has continued to push for gaining market access in such areas as telecomunication equipment, automobiles and agriculture. In October 1997, trade tension culminated when the United States designated Korea's auto market as a Priority Foreign Country Practice.
Due to a financial crisis, Korea had to request emergency financial assistance from the IMF, and thus is currently undertaking structural reforms in various fields. If Korea successfully implements economic restructuring, many significant trade and investment barriers will be removed, thus alleviating a main source for trade conflict. However, during the period of structural adjustment, sluggish economic performance will entail a sharp decline of import demand, and the United States is likely to become more aggressive in pressuring Korea to open its market.
In order to avoid bilateral trade conflict with the United States in this critical time, the following tasks should be undertaken. First, Korea must implement the IMF program faithfully to enhance its credibility. Second, Korea must reorgainize its export strategy to reduce bilateral trade tension and gain further access to the U.S. market. Third, Korea's export promotion system must be restructured to the extent that it does not violate WTO rules. Fourth, a strong and skilled trade negotiation team must be formed. Fifth, Korea should take advantage of the Korea-U.S. Free Trade Agreement as a mechanism to facilitate trade and investment liberalization. And finally, relations with the U.S. businessmen doing business in Korea should be strengthened.
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