Against the backdrop of growing political, diplomatic, and military- security significance, the strategic value of the Global South has been steadily increasing. The Global South is not an entirely new concept; rather, it constitutes a meta-category encompassing what were previously referred to as the Third World or developing countries, as well as regions sharing geographical commonalities in the Southern Hemisphere and historical experiences of discrimination and structural inequality.

Alongside the rising prominence of the Global South, another critical issue has recently drawn considerable attention in the international community: economic security. This reflects how the economy and security are once again becoming closely linked amid intensifying U.S.–China strategic competition and escalating rivalry over leadership in advanced science and technology. Contemporary discussions of economic security primarily focus on key areas such as supply chain resilience; the enhancement of industrial competitiveness, including the protection of advanced technologies; the prevention of excessive dependence on specific countries through the diversification of trade and investment; and responses to economic coercion (or economic statecraft).

As the importance of both the Global South and economic security has grown, it has become increasingly necessary to conceptualize these two dimensions in an integrated manner and to devise effective policy responses accordingly. Japan and China, both neighboring countries of the Republic of Korea, have already been actively pursuing Global South strategies and linking them closely with their respective economic security policies.

Against this backdrop, this study examines Japan’s and China’s Global South strategies from the perspective of economic security; analyzes the implications of these strategies for Korea’s own Global South strategy; and explores the potential for cooperation among Korea, China, and Japan in areas where economic security policy intersects with Global South strategies.

The analysis suggests that, compared with the Global South strategies of Japan and China, Korea’s approach remains insufficiently systematized. In particular, there appears to be a notable lack of systematic consideration regarding how to formulate and implement a Global South strategy explicitly grounded in economic security concerns. In response, this study offers several policy recommendations.

First, Korea should urgently establish a comprehensive and coherent Global South strategy, supported by a governance framework that brings together actors from government, academia, and the private sector. Policymakers, scholars, and business stakeholders should engage in joint deliberations on how to systematically design and implement a national Global South strategy, culminating in a unified strategic guideline.

Second, the Global South strategy should be closely aligned with economic security considerations and tailored accordingly. Based on a comprehensive assessment of Korea’s economic security environment, detailed analyses are needed to identify priority needs and to determine which Global South countries should be engaged first to strengthen cooperation. In particular, given that stability and progress in inter- Korean relations are crucial for establishing a stable economic security environment, this unique geopolitical context should be actively reflected in the formulation of Korea’s Global South strategy.

Third, institutional frameworks to promote people-to-people exchanges with the Global South should be strengthened. Such exchanges should encompass a wide range of areas, including tourism, international students, and highly skilled talent in science and engineering, and urgent institutional reforms are required to facilitate these interactions.

Fourth, Korea should develop a long-term Global South strategy that can be pursued consistently regardless of changes in political leadership, similar to China’s Belt and Road Initiative and Global Development Initiative (GDI), as well as Japan’s New Policy toward Enhanced Cooperation with Global South Countries.

Along with these implications for Korea’s Global South strategy, it is also necessary to consider cooperation among Korea, China, and Japan. To enhance the effectiveness of their respective Global South policies, the three countries should seek ways to reduce unnecessary competition and expand avenues for mutual cooperation. A representative example is cooperation with African partners. Rather than operating separate and competing platforms for engagement with Africa, the three countries could consider establishing an integrated framework—such as an “Africa + Korea–China–Japan” platform—to pursue more efficient cooperation. However, instead of hastily advancing “Korea–China–Japan + α” cooperation platforms in regions such as Africa or Latin America, a phased approach grounded in a long-term vision would be more appropriate. As an initial area of cooperation, the joint pursuit of secure access to critical minerals—an issue prioritized by all three countries—could be considered.

Finally, it is important to note that trilateral economic security cooperation should not remain confined to institutional or technical dimensions, such as critical mineral supply chains, but should also entail a broader shift in perception. Korea, China, and Japan need to move beyond zero-sum thinking, in which each views the others as competitors or potential threats to national economic security, and instead embrace a win–win perspective that recognizes the possibility of mutual benefit and coexistence. Under such a mindset, the Global South can emerge not as another arena of competition among the three countries, but as a new space for cooperation that generates shared national interests.

As climate change intensifies globally, developing countries face increasingly complex and compounding challenges. Widening gaps between their exposure to climate risks and their capacity to respond threaten to reverse decades of development gains and undermine sustainable development pathways. In this context, 'climate resilience' has emerged as a central concept in development cooperation, encompassing not only the capacity to withstand climate shocks but also the ability to adapt and pursue transformative change in response to long-term climate stress. Despite its growing prominence in international discourse, however, the concept has not been sufficiently translated into operational frameworks and measurable practices. Within Korea's ODA system in particular, climate resilience has yet to be systematically developed as an analytical and operational framework: it frequently appears in policy language and project titles without being meaningfully embedded in strategic design, results frameworks, or performance management. This conceptual ambiguity limits the effectiveness of climate resilience investments and undermines accountability for results.

This study addresses this gap by systematically reconceptualizing climate resilience within the context of development cooperation. It examines how the concept has evolved theoretically, how it has been measured in academic literature and by international organizations, how it is reflected in global cooperation trends, and how it is currently positioned within Korea's ODA system. On the basis of these analyses, the study proposes policy directions for the structural and operational integration of climate resilience into Korea's development cooperation.

Chapter 2 examines the conceptual foundations and measurement of climate resilience. Originally rooted in ecology as a concept describing a system's capacity to recover from disturbance, resilience has been progressively extended into the social, economic, and institutional domains. In international development, it now encompasses a multi-dimensional set of capacities: the ability to anticipate and prepare for climate risks, to absorb shocks when they occur, to adapt over time, and to pursue transformative change toward more sustainable configurations. This expanded understanding is reflected in the frameworks developed by major international organizations, including the OECD's Resilience Systems Analysis (RSA), the World Bank's Resilience Rating System (RRS), FAO's Resilience Index Measurement and Analysis (RIMA), and the WHO's Health Systems Resilience (HSR) approach. These frameworks have contributed to translating the concept into measurable terms relevant to development programming.

To map the current state of climate resilience measurement in the academic literature, this study conducted a scoping review of 52 peer-reviewed articles published between 2015 and 2025. In terms of definition, most studies emphasize absorptive and adaptive functions, while a smaller but growing share incorporates transformative capacity; a notable proportion, however, leaves the concept undefined. The concept is most frequently applied in sectors such as agriculture, urban systems, disaster risk management, water resources, and public health, with heat stress, flooding, and drought as dominant hazards. While household and individual levels remain the primary units of analysis, studies also extend to urban, national, and governance-system levels. Resilience is consistently measured as a multi-dimensional construct, most commonly organized around social, physical, economic, environmental, institutional, and human capital dimensions, and often structured through established frameworks such as the five capitals model or the absorptive–adaptive–transformative typology. Methodologically, composite indices remain prevalent, with secondary data most commonly used (46.2%), followed by primary data (38.5%) and mixed approaches (15.4%), alongside a growing use of mixed methods and satellite-derived data. Persistent limitations include the difficulty of capturing institutional and social dimensions, limited longitudinal data, and the lack of standardized frameworks for cross-context comparison.

In Chapter 3, the study turns to the international landscape of climate resilience cooperation in developing countries. Using indices such as ND-GAIN and the World Bank's Adaptation and Resilience (A&R) Index, the analysis finds that climate vulnerability is most acute in low-income, fragile, and climate-exposed countries, where institutional capacity and governance constraints significantly limit resilience outcomes. A striking pattern is that many developing countries have made measurable progress in formulating climate adaptation plans and policies, yet continue to face significant gaps in implementation capacity, highlighting the need for ODA to move beyond policy support and strengthen the institutional and technical systems required for effective action.

International cooperation has increasingly focused on these high-risk contexts, with growing investments in sectors directly linked to climate adaptation, including agriculture, water, energy, and water and sanitation (WASH). Text analysis of OECD Creditor Reporting System (CRS) project descriptions reveals that two themes emerge as dominant in reported activities: food security and community-based climate adaptation on one hand, and institutional capacity and organizational resilience on the other. Donor approaches have also evolved toward more integrated and system-oriented strategies, combining infrastructure development with capacity building and institutional strengthening. At the same time, important limitations persist: clear and standardized resilience indicators are often absent, capacity-building efforts are rarely linked to measurable outcomes, and long-term impact monitoring remains weak across most donor programs.

Chapter 4 evaluates Korea's development cooperation practice through the lens of climate resilience. Statistical analysis of Korea's ODA portfolio from 2015 to 2024 shows that while climate-related (C) and resilience-related (R) projects have each expanded considerably, projects that explicitly address both dimensions together (CR projects) account for roughly one percent of total ODA by volume. KOICA and EDCF together implement the great majority of CR-coded projects, concentrated in environment, infrastructure, agriculture, water and sanitation, and health. At the strategic level, while 'climate change response' and 'green ODA' feature prominently in key policy documents, ‘resilience’ as a clearly defined and operationalized concept remains largely absent. This partly reflects insufficient recognition within Korea's development cooperation system of the urgency and centrality of climate resilience as a cross-cutting concern. Only four of 26 Country Partnership Strategies (CPS) systematically reflect a climate resilience perspective. This points to the need to reframe climate resilience not as a sub-category of climate adaptation, but as a core integrating framework for sustainable development.

Case study analysis of six representative projects—spanning health, agriculture, water and sanitation, infrastructure, and ecosystem restoration across Latin America, Africa, and Southeast Asia—reveals a mixed picture. Positive examples exist: the Amazon health project explicitly defined climate resilience in its design rationale and applied WHO-based composite indicators to track resilience outcomes, while the Guatemala GCF project integrated ecological, economic, and social dimensions of resilience into its project logic. However, many projects continue to treat resilience as a label added onto conventional sector projects without meaningfully redefining the underlying project logic. Climate resilience is often absent from the problem analysis and logic model, and key assumptions in the PDM rarely reflect the climate risks and vulnerabilities that define the operating context. This is critical because projects targeting climate-exposed communities depend on well-specified assumptions about external conditions; when those conditions change, as they frequently do, only projects with adaptive management mechanisms built in are equipped to respond. The most pervasive weakness remains the absence of medium- and long-term outcome indicators, leaving results frameworks output-focused and ill-suited for tracking systemic resilience gains.

Chapter 5 synthesizes the study's findings and proposes an integrated analytical framework for climate resilience in development cooperation. The study argues that climate resilience is best understood along three defining axes: the subject of resilience (who or what must become more resilient), the object (resilience to what types of climate risks), and the means (how resilience capacities are built and strengthened). Subjects range from individuals and households through communities, national institutions, ecosystems, to interconnected socio-economic systems as a whole. Objects encompass acute climate shocks, such as floods and droughts, alongside chronic stressors like rising temperatures, groundwater depletion, and land degradation, as well as cascading indirect impacts such as food insecurity, disease outbreaks, displacement, and institutional failure. Means are organized along the well-established trajectory from anticipation and prevention, through absorptive and adaptive capacities, to long-run transformative change.

The chapter introduces a conceptual pathway model illustrating how the level of a society's climate resilience determines the development trajectory it follows after a climate shock. At the high-resilience end of the spectrum, a system experiences limited decline, recovers quickly, and ultimately reaches a higher developmental equilibrium than before. In contrast, systems with weak resilience may experience sharp and prolonged decline, permanent loss of previously achieved gains, or an inability to recover without major external intervention. This framing highlights that the goal of climate resilience programming in development cooperation is not simply to minimize damage, but to ensure that development gains are stable, durable, and capable of continuing to advance even in the face of recurring climate stress. The chapter further provides sector-specific guidance for agriculture, health, water and sanitation (WASH), and transport infrastructure.

The study concludes with policy recommendations at two levels. The most immediate priority at the policy and strategy level is to establish climate resilience as an explicit and operational objective. This should be reflected in Korea’s development cooperation strategies, sector guidelines, and country partnership strategies, supported by cross-agency coordination among KOICA, EDCF, and other relevant actors. At the project level, the study calls for a fundamental shift in how climate resilience is treated within the project cycle: from a label applied to titles and descriptions, to a design principle embedded throughout problem analysis, project logic and assumptions, and monitoring and evaluation systems. Ultimately, climate resilience should become not just the goal of select projects, but the operating logic of Korean development cooperation as a whole. It is an essential condition for delivering lasting, system-level impact in an era of accelerating climate risk.

U.S. tariff measures have expanded beyond China to include a broad range of major trading partners, such as the European Union, Japan, India, and Brazil. The global spread of tariff barriers poses a significant risk to the Korean economy, which has developed within an open, multilateral trading system. This study aims to support the sustainable growth of Korean trade by providing policy and strategic guidance in response to the global spread of tariff barriers. To this end, the study conducts a historical review of tariff increases, an examination of relevant trade law, empirical analyses, and simulation analyses based on a trade model.

Chapter 1 reviews the historical evolution of tariff policy across the 1930s, the 1970s, and the post-WTO period. Chapter 2 provides a comprehensive review of the expansion of U.S.-originated tariff measures, their legal foundations, and the responses of major economies. Chapter 3 traces the channels through which tariff increases affect the economy by reviewing the existing literature, and highlights theoretical, empirical, and quantitative findings on how tariff hikes influence prices, trade diversion, investment, employment, and welfare. Chapter 4 provides a statistical assessment of changes in the trade structures of major countries following the first Trump administration and examines performance trends among Korean firms exporting to the U.S. Chapter 5 develops a dynamic trade model to quantify how different global tariff scenarios influence trade flows, prices, and welfare.

The main findings are as follows. First, in the U.S. import market, China’s share has declined, while the shares of Korea, Mexico, Vietnam, and other countries have increased. Korea’s exports to the United States have grown, particularly in core industries. At the firm level, however, a dual pattern emerges: sales have increased, but profitability has not improved.

Second, the dynamic trade model shows that rising tariff barriers and policy uncertainty have differentiated effects depending on each country’s industrial structure and the substitutability of goods. Overall, however, they tend to result in lower trade, higher prices, and reduced consumer welfare. This underscores the need to mitigate short-term disruptions while strengthening medium- to long-term fundamentals. Our scenario analysis further indicates that the primary driver of global trade contraction is not targeted high tariffs on specific products but the escalation of tariff barriers between the U.S. and China. In addition, countries that, through separate agreements, secured reductions in reciprocal tariff rates and Section 232 tariffs experienced relatively smaller adverse effects, as they gained a relative price advantage over countries that did not.

Third, the current global trade environment is characterized by the weakening enforcement of WTO-based multilateral rules and the growing prominence of a power-based approach, led by the United States, that relies on domestic law as a policy instrument. In response, major economies are pursuing a range of policy options—including WTO litigation, retaliatory tariffs, negotiations, and the strengthening of domestic industrial protection mechanisms—depending on the level of tariff pressure under the second Trump administration and their respective economic structures.

Finally, Chapter 6 reviews Korea’s policy responses under the first Trump administration and the Biden administration. Building on the main findings of Chapters 1 through 5, it sets out six policy directions for the Korean government and businesses to prepare for the possible persistence and entrenchment of tariff barriers: (1) managing the “dual risks” confronting Korea’s exports; (2) pursuing product- and measure- specific responses while strategically utilizing exception clauses; (3) minimizing the adverse effects of circumvention trade and making effective use of trade remedy mechanisms; (4) expanding support for firms affected by global trade disruptions; (5) strengthening coordination between industrial policy and trade policy; and (6) making strategic use of legal and diplomatic channels.

Executive Summary

Contributors

List of Abbreviations

Preface

Chapter 1: Overview of the Bilateral Defense Industry Collaboration

Chapter 2: South Korea’s Rise to Global Arms Market Player

Chapter 3: India’s Defense Sector Development and Future Trajectories

Chapter 4: Strategies for Collaboration of Defense Industry Sector

Chapter 5: Way Forward and Policy Recommendations

References

Appendix

This study is based on the hypothesis that defense industry cooperation between India and South Korea (ROK) goes beyond the technical dimensions of defense and technology transfer. Instead, it serves as a strategic pathway to foster deeper mutual trust, enhance economic interdependence in trade and investment, and strengthen both countries’ positions as credible middle powers in an increasingly fragmented and volatile international order.

Building upon decades of export-driven growth that underpinned the “East Asian Miracle,” South Korea—now the world’s tenth-largest economy—seeks to transition into a sustainable, high-technology economy with the goal of joining the “higher high-income” group, by exceeding a per capita income of USD 40,000. Simultaneously, it is developing a modern and diversified defense portfolio to deter persistent security challenges from North Korea and its ongoing efforts to attain international recognition as a nuclear state. Confronted with external security threats and a protectionist trade environment under US President Donald Trump’s “America First” agenda, Seoul has adopted a dual-track innovation strategy. It aims to become one of the world’s top three artificial intelligence (AI) powers and among the top four global arms exporters in the near future.

India—the world’s largest democracy by population—is poised to become the third-largest economy within a few years under Prime Minister Narendra Modi’s “Make in India - Resilient India” policy. Departing from its historically inward-oriented economic posture, India is now positioning itself to seize global trade and investment opportunities. With per capita GDP still around USD 2,400, India seeks sustained high growth through deeper integration into the global economy. On the strategic front, New Delhi seeks to become a military power commensurate with its rising economic stature—not only to meet regional security challenges but also to strengthen its diplomatic profile as a leading middle power and a representative voice of the emerging Global South. Consistent with its long-standing multi-alignment approach, India continues to engage with a wide spectrum of partners, including the Western world, Russia, and China.

Given their ambitious national trajectories and complementary developmental strengths, India and South Korea share a strong potential for strategic convergence as like-minded partners. Both nations pursue strategic autonomy and diversification strategies in response to the intensifying US-China rivalry and broader instability across the Indo-Pacific. This shared pursuit of autonomy provides a compelling rationale for both countries to deepen and redefine the nature of their collaboration. Despite these synergies, bilateral economic connectivity remains underdeveloped. The Comprehensive Economic Partnership Agreement (CEPA), launched in 2010, has yet to deliver outcomes comparable to South Korea’s trade and investment linkages with China or Vietnam. In an era of proliferating minilateralism and protectionist fragmentation, both countries must find innovative pathways to unlock their untapped potential and realize the full promise of their strategic partnership.

In this context, defense industrial collaboration offers a powerful catalyst for expanding trust, trade, and investment. The India-South Korea partnership in defense production has already yielded tangible results, exemplified by India’s acquisition of the K9 Vajra-T self-propelled howitzer, co-developed with South Korea’s Hanwha Defense—a landmark success story that opens the door for wider cooperation. The implications of such collaboration extend far beyond defense procurement: by working together in arms production and technology transfer, Seoul and New Delhi can cultivate long-term strategic trust and generate spillover effects across broader economic domains.

Defense cooperation inherently builds trust because it touches the most sensitive spheres of national sovereignty—military capability, national security, and long-term technological capacity. Unlike ordinary trade, arms collaboration requires a multilayered ecosystem involving government-to-government (G2G), business-to-government (B2G), and business-to-business (B2B) interactions. For such cooperation to be robust, both sides must align top-down strategic agreements with bottom-up industrial innovation.

Initially focused on self-defense, South Korea’s land, naval, and air systems have now evolved into competitive export products, complementing its high- tech industrial structure. Successive South Korean governments have recognized the defense sector as a vital export frontier alongside semiconductors, electronics, and shipbuilding. Given the current defense portfolios of both countries, numerous avenues exist for deeper cooperation beyond the K9 Vajra project. Potential collaborations include South Korea’s K2 main battle tank with India’s indigenous rocketry and missile programs in the land domain; joint R&D between India’s Tejas and South Korea’s KF-21/FA-50 fighters in the air domain; and cooperation in drone technology and AI-based defense systems. In the naval sphere, South Korea’s world-class shipbuilding expertise can support India’s ambitions in carrier and destroyer production, as well as joint R&D in submarine propulsion and anti-submarine systems—areas aligned with their shared interest in a blue-water navy for Indo-Pacific security.

Across land, air, and sea, India and South Korea exhibit both overlap and complementarity. India brings scale, operational experience, and a strong policy push for indigenization under Atmanirbhar Bharat; South Korea contributes advanced technology, manufacturing efficiency, and export orientation. By combining India’s demand with South Korea’s supply capacity, the two countries can move beyond transactional arms sales toward co-development and co- production ecosystems—spanning tanks, howitzers, fighters, drones, submarines, and warships.

Toward a Sustainable and Future-Ready Defense Partnership

To enhance its defense industry and strengthen its role as a major arms exporter, South Korea is undertaking a wide range of R&D programs aimed at narrowing capability gaps across multiple domains. These R&D efforts can be pursued through both indigenous initiatives and international cooperation—areas where India and South Korea can selectively collaborate on shared defense technology agendas.

Recognizing that the future of warfare will be shaped by frontier technologies such as artificial intelligence (AI), autonomous systems, hypersonics, and electronic warfare, South Korea is pursuing a dual-track strategy: scaling up conventional arms exports to meet rising global demand, while simultaneously investing in frontier technologies to secure its long-term strategic edge. This dual approach aligns closely with India’s own defense industrial development under Atmanirbhar Bharat—balancing immediate operational needs with investment in next-generation technologies.

At present, India and South Korea maintain a buyer-seller dynamic. For a sustainable partnership, they must transition toward a co-developer relationship, grounded in joint R&D and long-term industrial collaboration. The India-France Rafale program and the India-Israel Barak-8 partnership exemplify how trusted, high-technology cooperation can bridge capability gaps while strengthening domestic industrial ecosystems. France demonstrates the power of deep strategic alignment and joint manufacturing; Israel showcases agile, innovation- driven co-development. Together, these partnerships form pillars of India’s evolving defense diplomacy—combining strategic autonomy with technological interdependence.

South Korea, though a newer partner in India’s defense matrix, can follow a similar trajectory. It has rapidly emerged as a global arms exporter by leveraging decades of industrialization to position itself among the world’s top suppliers. India, still the largest arms importer, is actively pursuing indigenization, innovation, and foreign investment to reduce dependency and build domestic capacity. The convergence of these trajectories provides fertile ground for collaboration. South Korea’s proven manufacturing excellence and India’s scale and demand can drive co-production, joint research, and a new wave of defense sector investment. Beyond defense, such cooperation could stimulate linkages in AI, aerospace, and advanced manufacturing.

Policy Recommendations for a Robust and Enduring Framework

1. Institutionalize Strategic Dialogues:Establish a regular summit mechanism and a biennial 2 + 2 meeting of Foreign and Defense Ministers dedicated specifically to defense- industry cooperation. These platforms should include fast-track decision-making to mitigate bureaucratic delays and manage risk effectively.
2. Adopt a Dynamic Defense Roadmap:Build upon the success of the K9 Vajra program by expanding collaboration into frontier technologies and joint export ventures. A shared roadmap should guide R&D priorities toward a future-ready defense ecosystem aligned with Indo-Pacific security objectives.
3. Prioritize Co-Development and Technology Transfer:Focus on areas of strong complementarity—artillery upgrades, naval shipbuilding, and space-based surveillance—leveraging South Korea’s high-tech engineering and India’s manpower, production scale, and market access.
4. Expand Maritime and Shipbuilding Cooperation:Launch a South Korea-India Naval Shipbuilding Partnership Initiative to jointly develop frigates, corvettes, and auxiliary vessels in Indian shipyards, including cooperation on green-ship technologies and submarine platforms.
5. Pursue Space and Satellite Collaboration:Co-develop dual-use satellites for defense communication, weather monitoring, and disaster response to enhance situational awareness and humanitarian coordination.
6. Deepen Cooperation in AI, Cyber Defense, and Quantum Computing:Encourage cross-investment and joint innovation in emerging technologies to ensure resilience and competitiveness in next-generation defense applications.
7. Align Trade and Defense Policies:Upgrade the Comprehensive Economic Partnership Agreement (CEPA) to integrate defense-industry cooperation and unlock the full potential of technology and capital flows.
8. Advance Middle-Power Diplomacy in the Indo-Pacific:Leverage the defense partnership as a platform for minilateral cooperation with ASEAN, Australia, and the EU—shaping regional governance frameworks and promoting collective security.

Conclusion

Defense industry collaboration between India and South Korea is far more than an arms trade arrangement; it is a strategic necessity for two middle powers navigating an unpredictable global order. By institutionalizing cooperation, leveraging complementarities, and aligning with regional frameworks, both nations can elevate their partnership into a cornerstone of Indo-Pacific security and economic resilience.

The pathway forward is clear: deepen trust, expand co-production, integrate emerging technologies, and embed bilateralism within multilateral structures. If pursued with vision and pragmatism, India-South Korea defense cooperation can stand as a hallmark of constructive middle power leadership, symbolizing a shared commitment to innovation, stability, and strategic autonomy by 2047.

Chapter 1. Introduction

Section 1. Research Background and Objectives
The Act on the Conclusion Procedure and Implementation of Commercial Treaties (hereinafter, the “Commerce Treaty Act”) was enacted in 2012 to address the lack of procedural transparency and insufficient public participation revealed during major trade negotiations, notably the Korea–U.S. Free Trade Agreement (FTA). The Act aimed to institutionalize transparency, predictability, and stakeholder participation across all stages—from negotiation to post-entry implementation—while ensuring systematic and democratic oversight of Korea’s trade policy.
Despite its initial promise, several institutional limitations have emerged. Certain procedures risked becoming mere formalities, undermining the Act’s purpose, while rapid shifts in the trade environment, including digital trade, supply chain realignment, and climate-related regulation, exposed gaps in its scope and adaptability. In particular, new forms of economic agreements that diverge from traditional tariff-based liberalization often fall outside the statutory definition of a “trade agreement,” weakening both democratic control and policy responsiveness.
This study therefore seeks to identify reform directions that can strengthen the Commerce Treaty Act’s legal coherence, democratic legitimacy, and practical effectiveness. The research focuses on four main objectives: enhancing institutional coherence, improving democratic transparency and oversight, ensuring effective domestic implementation, and reinforcing the legal framework to address structural changes in global trade governance.

Section 2. Scope and Limitations of the Study
This study examines the historical evolution, legislative intent, and operational performance of the Commerce Treaty Act, alongside a comparative analysis of treaty-making and implementation systems in the United States, the European Union, Japan, and China. Methodologically, it combines doctrinal and empirical approaches through the analysis of statutes, policy documents, and negotiation practices, complemented by expert interviews.
Although the confidentiality of trade negotiations imposes empirical limitations, the study nonetheless offers an analytical and policy framework for reforming Korea’s legal foundations for trade governance. It argues that international trade law research must extend beyond theoretical analysis to inform real policy reform and institutional design.

Chapter 2. Objectives and Legislative History of the Commerce Treaty Act

Section 1. Constitutional and Institutional Background
Article 6(1) of the Constitution of the Republic of Korea grants treaties the same legal effect as domestic statutes. Yet, before 2012, the practical exercise of this principle lacked sufficient checks and balances, as trade negotiations and ratifications were dominated by the executive branch with little parliamentary oversight. As modern trade agreements began to regulate sensitive domestic policy domains—such as environmental standards, labor protection, and investment policy—the need for greater transparency and democratic legitimacy became urgent.
The Commerce Treaty Act was thus established to give effect to constitutional principles of accountability and separation of powers. It introduced procedural obligations for prior, interim, and post-reporting to the National Assembly; mandated public hearings and information disclosure; and required the government to assess both the economic effects and implementation of trade agreements. These mechanisms were designed to secure procedural legitimacy and foster cooperation between the executive, the legislature, and civil society, thereby embedding democratic control into Korea’s trade policy architecture.

Section 2. Key Issues in the Legislative Process and Their Resolution
The legislative history of the Commerce Treaty Act reflects the accumulated tension between democratic oversight and the need for efficiency in foreign-economic negotiations. During the drafting process, lawmakers confronted several unresolved questions that had surfaced in earlier controversies surrounding the Korea–Chile, Korea–U.S., and Korea–EU FTAs. At the heart of the debate lay the appropriate degree of parliamentary participation. Some legislators argued that the National Assembly should possess the authority to approve the opening of negotiations in advance, thereby ensuring democratic legitimacy from the outset. The executive branch, however, warned that such ex ante approval would unduly constrain its flexibility in rapidly changing diplomatic contexts. The final text consequently adopted a compromise: the government would retain discretion to initiate negotiations but would be legally obliged to report to the Assembly at each major stage and to obtain its consent before ratification.
Another contested issue concerned the domestic effect of treaties. Certain early drafts had proposed conditioning the entry into force of an agreement on the prior enactment of implementing legislation, a design that would have delayed Korea’s international commitments until all domestic legal adjustments were complete. Because this approach was considered inconsistent with the country’s monist constitutional order, the provision was ultimately omitted. Instead, the Act emphasizes the timely preparation of necessary implementing legislation before a treaty’s entry into force.
Debates also arose over the definition of “trade agreement” and the treatment of information disclosure. Lawmakers sought to balance transparency with national security by adopting a principle of disclosure subject to narrowly tailored exceptions. When the National Assembly requests access to confidential materials, the executive is obliged to provide them under conditions safeguarding strategic interests. To enhance participatory governance, the Act further established a standing advisory committee composed of experts and industry representatives to channel stakeholder perspectives into negotiation planning. Finally, the Act introduced requirements for ex ante, interim, and ex post assessments of industrial impact and adjustment measures for sectors expected to suffer serious injury. In sum, the law emerged as a negotiated equilibrium between legislative demand for procedural legitimacy and executive insistence on operational flexibility.

Section 3. Assessment and Implications
The Act represents an important institutionalization of democratic control over Korea’s trade policy and a step toward restoring public confidence in governmental transparency. Nevertheless, continuous improvement is required to ensure that these procedures retain substantive meaning. Strengthening parliamentary review, enhancing legislative expertise, and linking trade policymaking to a medium- and long-term national strategy would ensure that democratic oversight remains compatible with efficient diplomacy.

Chapter 3. Treaty-Making and Implementation Systems in Major Jurisdictions

Section 1. United States
The United States operates under a dual system balancing executive flexibility and congressional authority. The Trade Promotion Authority (TPA) grants the President the power to negotiate trade agreements, subject to detailed congressional oversight and an expedited “up-or-down” approval procedure. While this enhances efficiency, it also preserves accountability through continuous consultation and reporting. The U.S. distinction between self-executing and non-self-executing treaties ensures that Congress retains control over domestic implementation. In comparison, Korea’s rigid parliamentary consent model provides clarity but can limit agility in fast-moving negotiations.

Section 2. European Union
The European Union’s common commercial policy, grounded in Articles 3 and 207 of the Treaty on the Functioning of the EU, constitutes an area of exclusive EU competence. The European Commission negotiates under mandates authorized by the Council, with the European Parliament exercising oversight and consent. Implementation occurs through the ordinary legislative procedure. Transparency is achieved through public negotiation directives, stakeholder consultations, Domestic Advisory Groups (DAGs), and annual implementation reports. The Chief Trade Enforcement Officer (CTEO) and Single Entry Point mechanism centralize enforcement. Korea could selectively adopt these practices—particularly in transparency, structured stakeholder participation, and integrated enforcement—to enhance the legitimacy and coherence of its trade governance.

Section 3. Japan
Japan, although lacking a dedicated statute equivalent to Korea’s Commerce Treaty Act, ensures coherence between international and domestic law through concurrent submission of implementing legislation and trade agreements to the Diet. This practice minimizes legal gaps between approval and enforceability, offering a pragmatic model that Korea could emulate to strengthen policy coordination.

Section 4. China
China maintains a dual ratification system shared between the State Council and the Standing Committee of the National People’s Congress. While WTO obligations are generally implemented through domestic legislation, many free trade agreements have achieved quasi-direct effect, reflecting pragmatic adaptation. China’s emerging mechanisms for treaty compliance review highlight the importance of maintaining internal consistency between domestic law and international commitments—a lesson equally relevant for Korea’s institutional development.

Chapter 4. Core Provisions and Practical Operation of the Commerce Treaty Act

Section 1. Analysis of Key Provisions
The Commerce Treaty Act regulates the entire life cycle of trade agreements—pre-negotiation, negotiation, ratification, and post-implementation—with the goal of embedding democratic control in each phase.
At the pre-negotiation stage, the Act mandates public hearings, parliamentary reporting, and economic feasibility assessments. These mechanisms were designed to make early-stage decision-making transparent and participatory. In practice, however, hearings have often been perfunctory and conducted with limited disclosure of substantive information. The absence of uniform standards regarding timing, content, and participant selection has weakened their legitimacy. Future reform should specify minimum procedural guarantees, require publication of background materials in advance, and ensure that stakeholder comments are publicly addressed. Economic feasibility studies, though conceptually sound, frequently rely on government-led modeling that omits sustainability variables such as labor and environmental impacts; they would benefit from independent review and mandatory submission to the National Assembly.
During the negotiation phase, the Act entrusts the executive with the duty to report material developments and to receive the Assembly’s opinions. While this arrangement represents progress toward legislative oversight, ambiguity persists as to what qualifies as a “material” change, and there is no binding obligation for the executive to incorporate parliamentary feedback. Establishing phased reporting—before, during, and near the conclusion of negotiations—could transform these exchanges from formality into genuine deliberation.
At the ratification stage, the government must submit a comprehensive impact assessment together with the agreement for legislative consent. Yet the current focus on macro-economic indicators limits the analysis of social or environmental consequences. Because assessments are usually completed after negotiations are substantially finished, opportunities for meaningful revision are scarce. Introducing interim assessments during negotiations, as practiced in the European Union, would allow earlier corrective action.
Furthermore, explanatory sessions that accompany ratification have often functioned as one-way briefings. Converting them into structured dialogues involving experts, labor, and industry would enhance transparency and accountability.
After a treaty enters into force, the Act requires evaluation of its economic effects and the adequacy of adjustment measures within ten years. This long-term review is commendable but administratively burdensome. Developing standardized templates, prioritization criteria, and shorter review cycles could improve feasibility. Publication of evaluation results must also strike a balance between public transparency and the protection of sensitive negotiating information. Finally, evaluations should expand beyond compliance metrics to include distributive and regional impacts, thus linking the Act’s procedural legitimacy with tangible socio-economic outcomes.

Section 2. Practical Application and Assessment
The experiences accumulated through the Korea–Chile FTA, the Korea–U.S. FTA, and the Korea–EU FTA demonstrated the growing importance of procedural transparency. However, even after the Act’s adoption, its implementation revealed persistent weaknesses. Parliamentary engagement remained limited, public hearings were criticized as symbolic, and ex post evaluations were inconsistent. The rise of new-generation trade instruments such as the Digital Economy Partnership Agreement (DEPA) and the Indo-Pacific Economic Framework (IPEF) further exposed definitional blind spots, as these agreements often escaped the Act’s procedural requirements.
To address these issues, the study proposes expanding the Act’s definition of “trade agreement” to include economic security–oriented instruments and digital cooperation agreements, introducing a procedural trigger system based on anticipated economic and social impact, and institutionalizing regular post-entry evaluations to strengthen both accountability and adaptability.

Chapter 5. Key Issues and Reform Proposals Concerning the Commerce Treaty Act

Section 1. Definition of “Trade Agreement”
The Act’s current definition focuses narrowly on comprehensive market- opening treaties, excluding new economic instruments that substantially influence Korea’s domestic economy. The definition should be broadened to encompass agreements addressing digital trade, supply chain resilience, or economic cooperation. By creating an extended category—“trade agreements and related economic arrangements”—the law would ensure that emerging instruments are subject to democratic oversight and transparency obligations.

Section 2. Trade Negotiation Structure and Policy Formation
Korea’s trade policymaking remains fragmented among ministries, including the Ministry of Trade, Industry and Resources and the Ministry of Economy and Finance. This dispersion hinders coordination. A reinforced inter- ministerial mechanism that allows early joint decision-making is necessary. At the legislative level, oversight should be shared among relevant committees—such as foreign affairs, agriculture, and environment—to reflect the multi- sectoral nature of trade policy. Integration between evaluation and adjustment mechanisms should also be codified within the Act to clarify responsibility and accelerate remedial responses.

Section 3. Implementation and Evaluation
Despite the Act’s commitment to transparency, negotiation stages remain opaque due to frequent claims of confidentiality. Public hearings occur infrequently, and stakeholder input rarely influences outcomes. Introducing interim disclosure and assessment procedures would enable real-time accountability. The government should be obliged to respond substantively to public submissions, and standing consultation platforms involving industry, labor, and academia should be established to ensure continuous dialogue. These reforms would enhance policy credibility and predictability.

Section 4. Additional Considerations under the Act
Article 20 of the Commerce Treaty Act allows for reciprocal measures when a counterpart fails to comply with obligations. However, it lacks operational clarity. Establishing detailed conditions, proportionality criteria, and termination procedures would improve enforceability. Likewise, Articles 16 through 19, which provide for domestic relief, should be supplemented with enforceable timelines and inter-ministerial coordination duties to ensure that adjustment measures function effectively.

Chapter 6. Conclusion

Since its adoption in 2012, the Commerce Treaty Act has provided Korea with an essential procedural framework for democratizing trade policy. By institutionalizing public hearings, economic feasibility analyses, and parliamentary reporting, it has strengthened legislative oversight and partially restored public trust that was eroded by earlier non-transparent negotiations. Nevertheless, profound transformations in global trade—ranging from digitalization and data governance to supply-chain security and climate policy—have exposed the limits of a statute conceived in the era of traditional FTAs.
The study therefore concludes that the Act must evolve from a procedural instrument into a comprehensive Trade Governance Integration Act. This re-envisioned framework should expand its legal coverage to include digital, environmental, and economic-security agreements, thereby ensuring that all significant external economic instruments are subject to democratic scrutiny. It should incorporate a differentiated procedural trigger system calibrated to the anticipated economic and social impact of each agreement, enabling agility without sacrificing accountability. Parliamentary oversight should be broadened across multiple committees so that trade’s cross-sectoral effects are adequately examined, while confidential information-sharing mechanisms safeguard national interests. At the executive level, the Act should codify explicit accountability through structured reporting and establish a permanent advisory council representing industry, labor, and civil society. Implementing legislation should be reviewed in parallel with treaty ratification to minimize the temporal and legal gap between international obligations and domestic enforceability. The linkage between post-entry evaluations and adjustment measures must be formalized to ensure that assessment results translate into concrete policy responses. Finally, the reciprocity clause should be operationalized through clear procedures for proportional countermeasures, aligning Korea’s enforcement capacity with global standards.
Through these reforms, the Commerce Treaty Act could assume the character of a quasi-constitutional foundation for Korea’s trade policy—a framework that unites democratic legitimacy, legal coherence, and strategic flexibility. By embedding the guiding principles of legal comprehensiveness, procedural democracy, coherent implementation, and international credibility, Korea would reinforce its position as an advanced trade state capable of navigating the intertwined domains of digital transformation, economic security, and sustainable development in the twenty-first-century trading system.

This study analyzes how patterns of change in global value chains (GVCs) have evolved among seven major Asian countries as the structural transformation of GVCs has deepened after the U.S.–China trade war. In particular, we closely examine whether India, Vietnam, and other key ASEAN countries are likely to play roles as indirect export and production hubs in response to GVC change. To this end, we use the ADB Multiregional Input–Output (MRIO) data for the 2015–2023 period and conduct an analysis that includes the latest information. To identify the flow of GVC change before and after the U.S.–China trade war, we divide the analysis period into three stages: the pre-trade-war period, Trump’s first term, and the Biden administration period. Through this analysis, the study aims to present policy proposals that enable Korea to respond effectively to the rapidly changing GVC environment by cooperating with India and major ASEAN countries such as Vietnam and Indonesia, thereby coping effectively with the evolving global economic order.

To achieve this purpose, Chapter 2 analyzes the changes in the value-added exports of major countries before and after the U.S.–China trade war. Chapter 3 examines mutual export dependence and production fragmentation on a value-added basis. Chapter 4 identifies the drivers of value-added change for major countries. Chapter 5 analyzes structural changes by indirect export hub, structural changes by final destination, and at the country and industry levels in roundabout (indirect) export structures. Chapter 6 presents policy recommendations and corporate response strategies that focus on cooperating with India, Vietnam, and Indonesia in response to GVC changes. It also discusses directions for the future development of this research.

In Chapter 2, we find that the Trump administration’s high tariff policy shocked GVC structures across the board. However, the relatively more industrialized economies of Korea, China, Japan, and Taiwan showed resilient responses. In contrast, India, Vietnam, and Indonesia were more strongly affected, and structural change was observed. Korea, Japan, and Taiwan maintained intermediates- oriented export structures, while China, maintained an FVA structure with final goods and defended its position as a global production base despite receiving relatively strong shocks. India shifted to an intermediates-oriented export structure, while Vietnam moved toward an export structure with higher dependence on FVA. Indonesia recorded a somewhat larger share of intermediate goods and re-exports. Overall, we interpret the high-tariff policy of the Trump administration as having had a substantial impact, exposing the external dependence of industrial structures in Asian countries and revealing limits of their domestic value-added export capacity.

In Chapter 3, we analyze changes of vertical specialization index. Korea, China, Indonesia, and India experienced declines in participation during the Trump period, followed by a short-term rebound, and then showed a renewed downward trend from 2021. Japan and Taiwan underwent continuous declines from 2015, then turned to an upward trend from 2021. Vietnam, although showing some fluctuations, exhibited an overall steady upward trend.

In Chapter 4, we break down the export variation arising from the U.S. high-tariff policy into changes in value-added coefficients, changes in technical coefficients, and changes in the scale of final demand. Our analysis shows that the degree of industrial upgrading leads to different effects on value-added exports and technological capability. For advanced industrial countries such as China, Korea, and Japan, changes in value-added and technical coefficients are identified as important drivers. Productivity improvement and technological innovation are interpreted as key factors behind export growth in these countries. By contrast, for emerging economies such as India, Vietnam, and Indonesia, expansion of final demand is analyzed as the most important driver of value-added exports. This reflects the fact advanced countries participate in GVCs based on technology- intensive industries, while emerging countries expand their demand base through inflows of foreign direct investment (FDI) and backward participation in GVCs.

In Chapter 5, we empirically analyze whether major Asian countries are likely to perform strategic roles as indirect-export and roundabout- export hubs under GVC change. Advanced industrial countries such as Korea, Japan, and Taiwan are analyzed as pursuing diversification of routes for exports to the United States. Due to their technology- intensive industrial structures and high GVC participation, these countries are upgrading their networks of indirect-export hubs and deploying sophisticated multi-route strategies. China plays a dual role as both a major indirect-export hub and a final-destination country of the indirect export. By contrast, emerging economies such as India, Vietnam, and Indonesia are emerging as new hubs for indirect and roundabout exports, and their strategic importance as platforms targeting the U.S. market is assessed to be expanding.

In addition, we analyzed the structure through which China’s intermediate goods are indirectly exported to the United States via other countries and observed relatively high re-routing-export shares of roughly 20–30%, with cross-country differences. In particular, re-routing-export shares via Korea, Japan, and Taiwan are very high, suggesting that Chinese products use higher value-added economies as re-routing routes. India, Vietnam, and Indonesia are shown to be moving beyond simple roundabout hubs and elevating their status as major production hubs within the GVC.

In Chapter 6, based on the preceding findings, we propose cooperation measures for Korea with major ASEAN countries such as India and Vietnam in response to GVC change. As GVC response strategies, we present the following implications: technically based trade diversification, establishing Korea’s GVC positioning strategy, mapping tariff differentials and preparing GVC reconfiguration plans, and maximizing and expanding the use of preferential trade agreements (FTAs). Along with policy recommendations regarding the evolving roles of India and ASEAN as roundabout/indirect-export hubs, we propose strategies for establishing global production and export hubs, as well as product- level response strategies for firms. Finally, we discuss the contributions and limitations of this study and directions for future research.

Since the early 2020s, a series of global economic disruptions—including the escalation of the U.S.–China trade conflict, the outbreak of the COVID-19 pandemic, the Russia–Ukraine war, and persistent political instability in the Middle East—has heightened geopolitical risks across East Asia and intensified the pressure for a restructuring of global value chains. In particular, following the inauguration of the second Trump administration in 2025, deepening political and economic tensions between the United States and China have exerted a substantial impact on the Korean economy, which had long relied on China as a pivotal component of its value chain. Under these circumstances, ASEAN has emerged as an alternative production base to China, underscoring its growing significance as a potential partner for more dynamic and diversified value chain integration with Korea.

Major research on international supply chains and value chains between Korea and ASEAN can broadly be classified into two categories:
(1) studies that analyze the overall industrial structures of Korea and ASEAN member states to identify complementarities and substitutabilities between the two regions, and (2) studies that investigate the general patterns of trade relations between Korea and ASEAN.

Empirical analyses drawing on more than two decades of statistical data indicate that trade and investment flows between Korea and ASEAN have expanded significantly, leading to the formation of complementary value chains shaped by differences in per capita income levels, wage structures, and resource endowments.

However, as most existing studies concentrate on national and industrial levels, they do not directly examine the activities or organizational structures of firms—the fundamental entities that constitute supply chains. These studies also fail to differentiate among various types of firms, including large corporations, small and medium-sized enterprises (SMEs), and foreign-invested companies operating within ASEAN. The present study seeks to address this limitation by conducting a firm-level analysis of ASEAN enterprises in order to identify the structural patterns and distinctive characteristics of value chains linking Korea and ASEAN.

The scarcity of firm-level analyses on Korea–ASEAN value chains can be attributed to several factors. First, comprehensive datasets and statistics on individual firms are largely unavailable in most ASEAN countries. Owing to relatively low income levels and limited corporate transparency, substantial portions of firm-level information are not publicly disclosed. Although listed companies are required to publish data in accordance with stock exchange regulations, the absence of well-established international accounting standards reduces the reliability of these statistics. Furthermore, a considerable number of firms remain unlisted and are therefore under no legal obligation to disclose their financial or operational information.

Second, even when firm-level data are obtainable at the national level, the process of compiling and analyzing regional datasets encompassing all ASEAN member states remains an extensive and resource-intensive undertaking. Given that ASEAN comprises ten countries, each with a vast number of enterprises, the collection and harmonization of such data represent a formidable challenge that is both time-consuming and difficult for individual researchers to execute independently.

To overcome these constraints, the present study assembled a comprehensive dataset on ASEAN firms and conducted the following analyses. First, financial information from listed companies across nine ASEAN stock exchanges was collected and systematically examined. The available data primarily encompassed indicators such as assets, liabilities, and profitability. A standardized analytical framework based on these financial metrics was employed to facilitate cross-country comparisons.

Second, for unlisted large firms, major representative companies in each country were selected, and publicly available information—such as newspapers, magazines, promotional materials, and websites—was used, given the lack of systematic financial data. For SMEs, the study relied on existing research on their characteristics and expert interviews.

Third, to examine the potential for cooperation between Korean and ASEAN firms, the presence and activities of Japanese and Chinese firms operating in ASEAN were also reviewed. Although most of these foreign companies were unlisted and reliable statistical data were limited, publicly accessible information sources were used.

The results of the analysis are as follows:
First, listed firms in ASEAN are mainly concentrated in (a) the domestic service sector, (b) the manufacturing sector—particularly food production, and (c) export-oriented mining and resource development. Within manufacturing, food processing had the highest share, followed by chemicals, basic metals, and rubber/plastics—indicating a focus on agro-processing and natural resource–based industries.

Second, unlisted large firms in ASEAN mainly focus on (i) domestic- oriented businesses and (ii) resource development. Specifically, they dominate sectors such as retail, real estate, and food production on the domestic side, and energy and resource extraction (e.g., oil, coal, cobalt, lithium) on the export side. These firms often operate as monopolies or oligopolies with close political ties and family-based management, resulting in non-transparent governance structures.

Third, while definitions vary by country, ASEAN SMEs are generally small in scale and concentrated in the service sector. They face limited access to finance, weak technological foundations, insufficient use of digital technology, and low productivity.

Fourth, Japanese and Chinese firms in ASEAN show distinct characteristics. Japanese firms have been active since the early 1990s, building regional value chains in electronics and automotive sectors, while also investing in local infrastructure and human resource training. In contrast, Chinese firms entered later, mainly after the 2010s, driven by the Belt and Road Initiative and China’s efforts to mitigate trade frictions with the U.S. Their investments have focused on large-scale, resource-related infrastructure projects financed by Chinese banks.

Fifth, Korean firms in ASEAN exhibit the following characteristics. Their initial entry in the 1990s was led by labor-intensive industries that were declining in Korea, expanded in the 2000s, and more recently diversified into electronics and automotive manufacturing, sometimes leveraging local natural resources. Large Korean firms operate local plants mainly in manufacturing, importing intermediate goods from Korea and exporting finished products to third countries. Many Korean SMEs and mid-sized firms function as suppliers to these large Korean firms, providing components and intermediate goods through local operations. However, cooperation with Japanese, Chinese, or local firms for parts procurement remains limited.

Future changes in Korea–ASEAN supply chains will depend on the evolution of ASEAN firms’ industries and roles. If ASEAN firms continue their current business models without expanding into manufacturing, Korea’s regional supply chains and value chains will likely continue to rely primarily on Korean firms operating locally.

In this case, the Korean government should implement policies to improve the productivity of Korean firms in ASEAN. Rising wages, land rents, and transport costs could erode profitability and even drive firms to relocate to other regions. As Latin America, India, and Africa are not yet viable alternatives, Korea must pursue policies that enhance labor productivity and business efficiency in ASEAN.

The most practical approach is to increase local labor productivity and reduce costs such as logistics.
1. Education and training for ASEAN workers are needed to upgrade them from unskilled to skilled or semi-skilled labor with higher productivity.
2. Management consulting should be provided to improve the productivity of both Korean and local firms in ASEAN.
3. Cooperation between large and small Korean firms should be strengthened to enhance overall supply chain efficiency.
4. Infrastructure support is crucial to control rising logistics costs—through port and road construction, customs digitalization, and energy system improvements.
5. New industrial parks and free trade zones should be established to mitigate rent and logistics cost increases.

To effectively promote these policies, several urgent tasks must be addressed: First, the Korean government and the public must recognize that supporting Korean firms in ASEAN is part of building global supply chains and value chains that contribute directly to Korea’s economic growth. Many policymakers and citizens still perceive international trade as simply exporting domestically produced goods abroad, overlooking the complex cooperation among firms across borders. Public communication and education should emphasize that supporting Korean firms in ASEAN ultimately strengthens Korea’s own industrial base.

Second, Korea should actively utilize ODA (Official Development Assistance) funds in ASEAN. Currently, about 23.8% of Korea’s ODA goes to ASEAN countries—five of which (Indonesia, Vietnam, Cambodia, the Philippines, and Laos) rank among Korea’s top ten ODA recipients. If ODA projects are designed to include participation by Korean firms in ASEAN, the effects of value chain formation could be maximized.

Third, political and business exchanges between Korea and ASEAN should be expanded through regular forums and seminars to build mutual understanding and cooperation.

Finally, youth and academic exchanges between Korea and ASEAN should be encouraged, as young people will be the future leaders of business collaboration between the two regions.

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.

Amid intensifying U.S.–China strategic competition, the global spread of de-risking, protectionist industrial policies, and economic security regulations is accelerating a structural reconfiguration of global value chains and supply networks. In strategic sectors linked to critical minerals, energy, advanced components and equipment, and digital and green transitions, major economies are increasingly prioritizing supply chain resilience and economic security alongside cost efficiency. Against this backdrop, China has been restructuring its overseas economic presence by combining multiple channels—including outward foreign direct investment (OFDI), overseas contracted projects, trade, and value-chain linkages via third countries—to build an integrated network of overseas production bases, supply bases, and infrastructure and logistics hubs. These developments create both constraints and opportunities for Korea's outward investment strategies, supply-chain resilience, and broader economic engagement with China.

This report examines the diversification of China’s overseas production and supply bases from an integrated perspective encompassing investment, trade, and infrastructure networks, and assesses the implications for Korea’s competitiveness. The study adopts a functional framework that distinguishes three core dimensions of China’s overseas economic network: overseas production bases (manufacturing, assembly, and processing), overseas supply bases (procurement of resources, intermediate goods, and capital goods), and infrastructure and connectivity hubs (including EPC projects, industrial parks, and logistics corridors). To operationalize this framework, the analysis uses quantitative indicators such as manufacturing and mining OFDI, primary metal manufacturing OFDI, imports and exports of intermediate and capital goods, raw mineral imports, and overseas contracted project values as well as BRI-related shares. Changes in the scale and regional composition of these indicators are tracked over time across 211 countries and 11 regions. After standardizing these indicators, the study identifies several types of overseas hubs, including production-oriented hubs, supply-oriented hubs, integrated production–supply hubs, infrastructure-led hubs, and potential emerging hubs. These typologies provide the basis for subsequent regional case studies.

The analysis shows that China’s overseas network diversification is evolving along three main trajectories. First, production functions are increasingly dispersed geographically through manufacturing OFDI, with assembly and final processing activities relocating to host economies while research and development and core component production remain largely concentrated in China. This pattern reinforces vertically specialized value chains anchored in Chinese intermediate goods. Second, supply functions are being selectively diversified by resource type and region. Chinese firms have actively secured critical minerals—such as lithium, nickel, cobalt, and copper—through vertically integrated mining and processing investments in Latin America, Africa, and Southeast Asia, while continuing to rely on advanced economies for high-end capital goods and key technologies. Third, infrastructure and connectivity functions are expanding through investments in ports, railways, industrial parks, and projects associated with the Digital Silk Road. These initiatives strengthen transport, energy, and digital networks in Belt and Road Initiative (BRI) and other partner countries, while also embedding Chinese technical standards and creating long-term economic footholds.

Within this evolving structure, ASEAN is consolidating its role as a comprehensive hub that combines manufacturing bases with intermediate-goods trade and, in some cases, resource procurement. Latin America, Africa, and Oceania are emerging primarily as critical mineral and energy supply hubs, with gradual upgrading into processing and manufacturing activities. Meanwhile, the European Union and Northeast Asia continue to function as hubs for advanced capital goods, technology, and regulatory governance.

These developments are reshaping the competitive landscape between Korea and China across major regions. In ASEAN, competition is intensifying around manufacturing ecosystems and supply- chain integration in strategic sectors such as electric vehicles, batteries, electronics, and machinery. Chinese firms leverage advantages in scale, capital, and infrastructure connectivity, while Korean firms tend to rely more on technological capabilities and selective investment strategies. In Latin America, resource acquisition, infrastructure development, and market access are closely intertwined. China’s vertically integrated resource–infrastructure strategy contrasts with Korea’s more fragmented, firm-led and import-centered approach, creating structural constraints for Korea in securing upstream resource supply. In the European Union, China faces tightening regulatory and economic security constraints but remains a major supplier of capital goods and consumer products. Korean firms must therefore defend niche strengths while adapting to evolving regulatory frameworks concerning investment screening, carbon regulations, critical raw materials, and supply-chain due diligence.

In light of these developments, the report argues that Korea should move beyond a country- or region-centric perspective on China’s overseas expansion and adopt a hub- and network-based strategic approach. Korea’s global strategy should therefore focus on four priorities. First, the government should establish a permanent monitoring and early-warning system to track the evolution of China’s overseas production, supply, and infrastructure hubs, as well as associated indirect export routes. Second, Korea should reconfigure its portfolio of overseas bases according to functional roles—such as production, resource procurement, logistics, and research and development—while avoiding excessive reliance on a limited number of multi-purpose hubs. Third, Korea should make strategic but carefully risk-managed use of third-country hubs where Chinese and Korean economic footprints overlap, including countries such as Vietnam, Mexico, and parts of Central and Eastern Europe, particularly in anticipation of stricter rules of origin and ESG-related requirements. Fourth, Korea’s overseas engagement model should be differentiated from China’s by emphasizing technological sophistication, reliability of supply, transparency, and alignment with host-country development and governance objectives. Strengthening whole-of-government coordination and public–private risk management capabilities will be essential for Korea to effectively navigate China’s expanding overseas network while safeguarding its own industrial competitiveness and economic security.

Korea’s Official Development Assistance (ODA) has recently experienced rapid growth, surpassing 6 trillion KRW in 2025. However, according to the Ministry of Economy and Finance’s 2026 budget proposal, the ODA budget is projected to decrease by approximately 1.2 trillion KRW to 5.3 trillion KRW compared to the previous year. While budgetary adjustments due to the national fiscal situation are necessary, Korea’s ODA/GNI ratio remains at 0.21%, falling short of the OECD Development Assistance Committee (DAC) member average of 0.33%. Therefore, securing financial resources for development is crucial for Korea to remain a responsible contributor to the international community.

The global community has increasingly emphasized the role of public finance as a lever to mobilize private capital. Since 2023, the DAC requires members to report data on Private Sector Instruments (PSI) when submitting ODA statistics. PSI refers to public financial resources used for loans, guarantees, and equity injections aimed at inducing private investment in developing countries. This shift acknowledges the efforts of donor governments to steer private investment toward international development sectors that are otherwise less attractive to the private market. Major developed countries, such as the UK (BII), Germany (DEG), and France (Proparco), have long operated Development Finance Institutions (DFIs) to engage the private sector in international development. More recently, the US (DFC) and Canada (FinDev) have established their own DFIs. These institutions operate on the premise that the private sector is the engine of growth, contributing to the advancement of developing countries through strategic investments. DFIs use various financial instruments to facilitate private investment. They are typically subsidiaries of government ministries or public corporations, receiving initial capital from the government but sourcing subsequent operational and project funding through market borrowing or reinvestment of portfolio returns, rather than relying solely on government budgets. This operational model presents a new and challenging paradigm for Korea, whose international development cooperation has traditionally been confined to ODA.

The purpose of this study is to propose policy directions for Korea to reduce its dependence on government budget for international development and enhance the utilization of private sector resources.

Chapter 2: Reviews the theoretical background and DAC discussions, focusing on the importance of the private sector and the role of donor governments. It analyzes the concept and principles of Blended Finance and examines how PSI data is accounted for in ODA to understand the modernization of the ODA definition.

Chapter 3: Analyzes the status and characteristics of Mobilized Private Finance (MPF) and PSI using DAC CRS statistics. While MPF aggregates are available, details on investment sectors, regions, and mobilization types are derived from DAC reports. The analysis of PSI trends utilizes CRS PSI project-level statistics, noting that time-series analysis is limited due to the official collection starting only in 2023.

Chapter 4: Focuses on the DFI model of major donor countries. The DFIs examined in this chapter operate with the distinct goal of supporting private sector growth in developing countries. Their funding model—primarily relying on market borrowing rather than government budgets—offers critical lessons for Korea, which currently uses the national budget as its sole source of international development finance.

Chapter 5: Diagnoses Korea’s current limitations and proposes policy directions and institutional improvements based on the preceding analysis. It examines recent shifts by the Korea Eximbank and outlines strategies for sustainable international development cooperation, focusing on resource mobilization, financial cooperation methods, beneficiary targeting, and risk management.