Electronic commerce is emerging as one of the main issues in the international community. It has the potential of becoming one of the major features of economic development in the 21st century, changing the conventional method of transactions. Consequently, as a new way of doing business, electronic commerce will require significant changes in the existing trade norms.

A major issue in electronic commerce deals with its taxation aspects, as various problems arise in applying current international taxation system to electronic commerce. However, even with a strong initiative to align multilateral rules governing electronic commerce, there can be varying positions among countries simply due to concerns of undermining their tax revenue.

OECD is a dominant agenda-setting body leading international discussion on the taxation of electronic commerce. In this context, this study summarizes OECDs discussions on electronic commerce with regard to taxation and examines policy implication for Korea.

Issues of discussions surrounding taxation policy on electronic commerce includes Value-added Tax (VAT), customs duties, international taxation, and tax administration. In the case of VAT, the main issue at hand is determining the country of origin of supply to assess product/service-related tax liabilities. As for customs duties, there is a growing need to differentiate taxation according to the method of transaction, as goods can effectively avoid taxation when ordered or delivered electronically. Regarding international taxation on corporate income, concerns are related to determining the place of permanent establishment and to transfer pricing. Lastly, tax administration issues deal with taxpayer identification, acquiring evidences on taxable transactions and income, application of tax rules, and maintaining tax revenues, by securing information on taxpayers and income through a consolidated network.

Domestically, the question of how to address taxation problems regarding electronic commerce is also a top priority. The basic principle of the solution will be to modify the tax system and administration to incorporate transaction via the internet, while focusing efforts to shape international norms in line with national interests by participating in discussions within international organizations such as the OECD.

Most importantly, with regard to Koreas taxation policy on electronic commerce, provision of services by foreign companies needs to be included as a taxable transaction in the VAT system, which is currently bases its principle of taxation on the country of destination.

In respect to the demand for discriminatory tariff treatment between products traded traditionally and electronically, Korea may have to adhere to the declaration made at WTO Ministerial Meeting to introduce no new tariffs for products traded electronically. However, with the development of taxation technologies and further discussion within the WTO and OECD, a more in-depth study on the possibility of tariffication needs to be conducted.

As for taxation of income generated from by foreign companies from domestic electronic commerce, Korea should adopt a system of taxing the income source, irrespective to the presence of permanent instablishment. While this is not a matter solely under the national authority of individual states, considering that a consensus for greater taxation right of country of origin is expected to increase within OECD, Korea needs to take a more clarified position on the issue. Lastly, regarding transfer pricing, Korea must accumulate its own experiences in line with the current discussions within the OECD.

The core issue in taxation of electronic commerce is identifying individual transactions made through internet. Taxing authorities, therefore, in cooperation with the financial institution who possess information related to electronic commerce transactions, will have to look for ways to efficiently solve taxation problems, by, for example, intervening in the payment process to levy withholding taxes. At the same time, they need to systemically introduce electronic technologies in the taxpayer service system in the long term.

Studies on Recent Investment Dispute Cases
Kwanho Kim Sungmi Lee

In the world economy today there exist many international arrangements concerning FDI. The arrangements set forth the rights and obligations for the actiors in the area of FDI, such as multinational corporations, host country government, and home country government. For example, host governments should treat foreign investors on a non-discriminatory basis and should protect their property. Corporations are obliged to accept the laws of the host government and are also obliged to avoid restrictive business practices. The home government has an obligation to recognize host government's right to regulate the activities of corporations. Such a complex network of rights and obligations produce occasional disputes between actors.

This report studies recent investment dispute cases which have some implications for Korea.Chapter 2 looks at investor dispute cases under NAFTA. The NAFTA Investment Chapter provides investors with strong ivnestment protection and an arbitration mechanism to resolve disputes between an investor and the state. While NAFTA is a trilateral agreement, similar disputes could occur under a BIT with the U.S., which is being negotiated, or under a multilateral investment agreement, which is expected to emerge in the near future.

Chapter 3 looks at some labor-management dispute cases in foreign invested enterprises. Due to their complex nature as multinationals, labor disputes are sometimes not settled at the local level, but develop into diplomatic disputes between the host and home governments. The OECD Guidelines on Multinational Enterprises and their procedural mechanism are potentially effective in settling such disputes.

Chapter 4 reviews the development of the U.S.-EU dispute over the Helms-Burton law, focusing on the context of MAI negotiation at the OECD. The dispute was settled by the two sides reaching an Understanding in May. An important meaning of the Understanding was lost by the de facto failure of the MAI negotiation. But the disciplines on illegal expropriation which were developed by the two sides, will have impact on future rule-making on this issue at the multilateral level.

Chapter 5 looks at state to state dispute case which the U.S. charged that the EU`s restrictions on banana imports were unfair. The WTO Panal founded that the EU did not fulfill its WTO obligations under the national treatment principle of GATs. However, the U.S. is in the process of preparing retaliation as the EU`s proposed import regime remains inconsistent with the WTO ruling on the banana.The case marks the time that a WTO dispute settlement panel has ruled on the GATs ; its findings will likely guide interpretation of similar cases in the future.

Trade Facilitation in the WTO and Policy Implications for Korea
Chan-Hyun Sohn and Hyo-Sung Yim
Trade Facilitation is often defined as "the simplification and harmonization of international trade procedures" with trade procedures being the "activities, practices and formalities involved in collecting, presenting, communicating and processing data required for the movement of goods in international trade". This definition relates to a wide range of activities such as import and export procedures (e.g. customs or licensing procedures); transport formalities; payments, insurance, and other financial requirements. Steadily growing volumes of trade, together with tariff levels at an all-time low after the conclusion of the Uruguay Round and modern technology available to significantly improve the management of cross-border trade and distribution of goods have lately created a strong interest from international business in the improvement of the infrastructure for international trade. The losses that business suffers through delays at borders, complicated and unnecessary documentation requirements and lack of automation of government mandated trade procedures are estimated to exceed in many cases the costs of tariffs.

Work in this area has been carried out by organizations such as UNCTAD, UN/ECE or the WCO for several decades. At the regional level, initiatives such as APEC and ASEM either in the framework of customs cooperation, general trade facilitation work, or in support of free trade agreements have recognized the need to reduce, simplify and harmonize trade procedures. However, trade facilitation was only added to the WTO agenda in December 1996, when the Singapore Ministerial Declaration directed the Council on Trade in Goods (CTG) "to undertake exploratory and analytical work, drawing on the work of other relevant organizations, on the simplification of trade procedures in order to assess the scope for WTO rules in this area." Specific elements connected with the simplification and harmonization of trade procedures are already contained in the WTO legal framework, e.g., in Articles V, VII, VIII, X of the GATT 1947 as well as the in Agreements on Customs Valuation, Import Licensing, Preshipment Inspection, Rules of Origin, Technical Barriers to Trade, and the Agreement on the Application of Sanitary and Phytosanitary Measures. However, only the Singapore Ministerial Conference gave the WTO the mandate to take a more comprehensive look at trade facilitation.

WTO's initiative on trade facilitation has advanced considerably with the holding of a symposium on trade facilitation in March 1998, where members heard first-hand from some of the most prominent corporations in the world on the practical problems they encounter in moving goods across borders. The symposium placed WTO Members in a position to move to the phase of analytical work on trade facilitation, in order to assess the scope for WTO rules in this area, as set out in the Singapore Declaration. In the WTO Trade Facilitation Symposium, a large number of issues were raised, which forms the basis of the current WTO discussions.

Work within the WTO thus far, through a series of informal discussions under the auspices of the CTG, has identified problems of real concern concerning customs procedures and physical movement of consignments. The CTG's next discussions will be critical in the development of the issues which will focus on relevant elements of various WTO Agreements, the role of electronic commerce and the link between economic development and the trade facilitation environment. However, work on trade facilitation is still in its initial stages with discussion being confined to identifying areas where WTO has a relevant role and if WTO has a relevant role at all in trade facilitation. While considerable time will be required to make any progress within the WTO that would ultimately lead to rule-making, there is a consensus among the key players, such as the EU and US, for a need for additional WTO action on trade facilitation. With CTG's recommendations due to be made at the Third Ministerial Conference, it is highly probable that that trade facilitation will be incorporated into next phase of WTO negotiations scheduled to be launched in the year 2000.

Trade facilitation has numerous implications for Korea. As Korea relies heavily on trade, trade facilitation initiatives could provide an opportunity for domestic firms to strengthen its competitiveness by substantially reducing logistic and financial costs. Therefore, there is no reason for Korea to oppose WTO's initiative in the field of trade facilitation. Rather, Korea should take an active position in the multilateral discussions since it has already achieved to a considerable extent modernization of customs procedures and the benefits of trade facilitation accruing to domestic firms are substantial. Moreover, in order to reap the full benefits of trade facilitation, Korea must continually reform its customs laws and procedures in line with the changing technological and global trade environment..

The recent financial crisis has pressed the Korean government to further accelerate liberalization of investment in order to improve the local financial and business environment. Foreign direct investment (FDI) in Korea has decreased in the first half of 1998 to USD 2.5 billion, a 44.9% decrease from the same period in 1997. However, the recent trend has shown substantial month-to-month increase. As of November 1998, aggregate FDI had already equaled 1997 total FDI of USD 7.0 billion.

Korea imported USD 2.4 billion in technology in 1997. The U.S. and Japan contributed 60.8% and 20.9% of the imports, respectively. The government of Korea has promoted international cooperation in R&D in various forms. At the governmental level, the International Joint Research Program, which started in 1985, has played the major role. So far, 906 joint projects have received a total of USD 41 million in support from this program. The government-sponsored research institutes are also involved in boosting cooperative international R&D efforts. Large firms have actively pursued strategic technological alliances with leading multinational corporations(MNCs).

As Korea has been losing competitiveness due to rising labor costs, restructuring the industry to improve the competitiveness of Korea's high technology and high value-added production has become an increasingly important part of the national agenda. In order to implement this agenda and to provide alternatives to those workers displaced by financial and corporate restructuring, the government has emphasized the promotion of small and medium-sized firms, especially new ventures. While beginning in the 1960s, venture business only began to emerge in the 1980s as a viable concern. There were about 1,500 venture enterprises with more than 70,000 employees in Korea as of 1996. Both public and private organizations are involved in the promotion of venture businesses.

The most ambitious national agenda adopted by the new government is the knowledge-based nation building for the 21st century. According to the plan, a substantial amount of new investment will go towards information infrastructure, development of new knowledge-based industries, improvement of the science and technology environment, and education reforms.

Many barriers and problems hindering technology-related investment and joint ventures with foreigners still need to be overcome. However, the recent efforts of the government, such as the enactment of the Foreign Investment Law, as well as actions by other public and private organizations to reform the economy and improve the investment climate, promise to induce more active involvement of foreign partners. The strategy to build a knowledge-based economy will also render a favorable environment to induce increased FDI.

Increasing Foreign Direct Investment (FDI) is one method through which Korea can overcome its economic crisis and implement successful restructuring. For this purpose, the further use of Industrial Free Zones (IFZs), which provide incentives and exceptions from normal regulations, is now being considered. The idea for expanding the usage of IFZs is derives from the new Foreign Investment Promotion Act as the promotion of Foreign Investment Zones (FIZs: Table).
Table. Criteria for designation of FIZ

While there are no FDIs designated as FIZs yet, provisions in the Act seem to generate significant confusion in actual implementation. Therefore, further review and discussions on the specific measure and process to promote FDI inducement by way of the FIZs is indispensible to maximize its effect.

In this context, a case study on the IFZs seen in various forms in other countries can be useful. This paper analyzes and compares IFZs in foreign countries including the U.K., China, Mexico, Philippine, Japan, and Malaysia, and also in Korea. Korean IFZs studied include the Industrial Park for Foreign companies and the Free Export Processing Zone. In addition, current and potential problems in the newly conceived FIZs have been studied.

Based on analysis of the above-mentioned IFZs, we proposed three key strategies in terms of the IFZs to induce FDI. The first strategy is to increase efficiency of existing Fenced Industrial Free Zones such as the Free Export Processing Zone and Industrial Park for Foreign Companies. Second is to prepare measures to efficiently manage the FIZs. Third is to designate the International Free Zone as a long term strategy of economic development in Korea.

Assessment of IMF Emergency Financial Support Programs in East Asia and Prospects for Strengthening the International Financial ArchitectureHyoungsoo Zang and Yongkul Won

Despite strong financial and policy interventions by the International Monetary Fund (IMF), the East Asian financial crisis has continued to worsen beyond expectations. And as the contagion effects of the crisis carried over to other regions, there have been an increasing number of critical and skeptical views on the operative role of the IMF.

Given the haunting experience of the East Asian financial crisis, restructuring the IMF-led international financial system as well as designing policies for the future crisis-prevention through international cooperation are emerging as urgent issues.
This study intends to analyze and assess the implications of the emergency financial support mechanism of the IMF and its management of the financial crises in Korea, Thailand, and Indonesia. We also discuss prospects for strengthening the international financial architecture, and suggest policy directions for the Korean government.

The structure of this study is as follows: In Chapter 2, we have analyzed the causes of the East Asian financial crisis, and offered an explanation of the basic nature of the crisis in order to assess the IMF's crisis-resolution programs.

In Chapter 3, we have chronologically analyzed the development and background of the East Asian financial crisis. We then evaluated and summarized policy measures of the affected governments and the IMF prior to and after the crisis.

In Chapter 4, we have evaluated the IMF's emergency financial support mechanism from the post-event perspective. We have given emphasis to analyzing whether the currently controversial IMF financial programs have had a positive effect on the recovery efforts of East Asian economies, as well as assessing the timeliness and promptness of the IMF's intervention. To do this, we have examined the theoretical basis and potential problems of the IMF's macroeconomic program, and evaluated the microeconomic restructuring programs for the affected East Asian countries. In the course of assessment, the high-interest-rate policy of the IMF is examined both theoretically and empirically.

In Chapter 5, we have summarized the increasingly important issue of improving the current IMF-led world financial system, the need for which has been well demonstrated by the enduring effects of the financial crisis in East Asia. And then we have discussed issues, such as regulating short-term capital movements and burden-sharing of private international creditor institutions, which are likely to become a focus of attention in future discussions on the necessary alterations of the international financial architecture.

In Chapter 6, we have discussed what the implications of the new international financial structure are for the Korean economy and the appropriate policy responses.

Finally, Chapter 7 presents the conclusion of the study.This study recognizes that the East Asian financial crisis primarily resulted from reaction to panic and temporary illiquidity, and was further exacerbated by the failure of affected governments to respond with the appropriate policy measures. Furthermore, the prompt response of the IMF to the requests of the East Asian countries in crisis enabled the maintenance of their external payments. By putting a cap on the panic in the international financial market, the IMF has proven its raison d'?ochtre. The IMF's East Asian financial program comprises the traditional policy of restraining aggregate demand and the relatively new structural restructuring policy. In particular, the financial program requires the East Asian countries to comply with its demand for rigorous restructuring in the weak financial sector, which is considered a fundamental cause of the crisis.

This study's ex post assessments are such that the policy of restraining aggregate demand and the accompanied high-interest-rate policy of the IMF failed to grasp the intrinsic nature of the East Asian crisis. The episodes of frequent revisions of the IMF financial program in the course of dealing with the crisis have proved its ineffectiveness. We point out that the program may have at times intensified the crisis. Considering the IMF's structural adjustment programs, although the direction for financial and corporate restructuring has been set apropos, a question should be raised as to whether the IMF had not overly demanded in light of the difficulties in the process.

Had the IMF emphasized a more intensive restructuring of short-term external debts in the private sector and maintaining sufficient foreign exchange liquidity in early stage of the crisis, instead of its policy of restraining aggregate demand, the situation would be more benign. Such measures would have reduced uncertainty and thereby insured continued capital flows into the corporate sector. Furthermore, attempts should have been made to enhance the health of financial institutions in the early stage of the crisis. The financial and corporate structural reforms should have been the focus of ensuing measures.

Maintaining the working framework of the IMF and World Bank, and strengthening the function and role of the IMF are likely to be the direction of changes in the international financial architecture. Consensus will be reached easily on enhancing transparency of information and strengthening prudential regulations while the principle of capital account liberalization in the long run will not be disputed unless there is a fundamental change in the trends of globalization and trade liberalization. Thus, remaining issues of debate will concern the regulation of short-term capital movement and burden sharing by private international creditors in times of crisis.

There have been numerous discussions on how best to regulate short-term capital flows, but realistically, there are few effective measures that may be taken. Dimming any prospect for direct capital control is the opposition from the United States and most other major industrialized countries. This study notes that regulations on short-term capital movements are likely to be conducted within the framework of orderly capital account liberalization of the IMF. Nevertheless, a scheme will be initiated by early 1999 to strengthen the information disclosure of, and prudential supervision of hedge funds and other highly leveraged financial transactions.

There is a wide consensus on the principle that international private creditors and investors should share the burden of resolving the financial crisis. However, it may take some time for the international community to reach an agreement on what specific measures should be adopted. For instance, burden sharing through debt reduction by private creditors will not likely materialize soon.

Due to the recent trend of globalization and surging flows of international capital movements across borders, the IMF does not have sufficient funds to mitigate the negative effects of the international private capital volatility, and thus can no longer play the role of the international lender of last resort. The IMF may well have the authority to declare a temporary debt payment standstill for a crisis country and subsequently organize negotiations on debt restructuring.
This study recommends that the Korean government advocate in principle the need for a systematic burden sharing of international private creditors. Nevertheless, Korea would not get much out of the establishment of the prospective schemes of burden sharing, such as collective action clauses or debt reductions. The scheme, if implemented, is likely to result in a rise in debtors' financing cost of the capital in the international financial market as a result of the increase in the credit risk. Even in the case of external debt reductions, it would damage investors' confidence. Moreover, history tells us that the benefit of external debt reduction is no greater than the long-term cost, incurred by the loss of international confidence.

Lessons of the East Asian financial crisis suggest that strong macroeconomic fundamentals and sound policies are indeed indispensable and necessary conditions for the prevention of a financial crisis, but not sufficient. A small open economy's effort alone could maintain economic stability in the gigantic and volatile ocean of the international financial market. In this context, the importance of a multilateral financial organization that commands the international financial order must be emphasized. However, the organization should exercise the power with prudence, under justice and supervision.

A Case Study on the WTO Dispute Settlement Mechanism：United States - Restrictions on Imports of Cotton and Man-Made Fibre UnderwearWook Chae & Chang-Bae Seo

1. Claims at the Panel Stage

On March 27, 1995, a formal complaint was made to the Dispute Settlement Body (DSB) of the World Trade Organization (WTO) by Costa Rica over the restriction of imports of cotton and man-made fibre underwear imposed by the United States. A panel was established by the DSB on March 5, 1996 accordingly to the complaint made by Costa Rica on February 22, 1996, that the import restriction measures imposed by the United States on textiles from Costa Rica were in violation of the Agreement on Textiles and Clothing (ATC).

The panel concluded that the import restriction measures imposed by the United States was not valid, with the final report of the panel being circulated to WTO members on November 8, 1996. In an appeal by Costa Rica to the Appellate Body on one aspect of the Panel's conclusion supporting the United States' backdating of the effectivity of its transitional safeguard measure, the Appellate Body ruled in favor of Costa Rica on that particular point. The report of the Appllate Body was circulated to WTO members on February 10, 1997 and adopted by the DSB on February 25, 1997. In a DSB meeting held on April 10, 1997, the United States announced that it has ended the measures subject to the dispute as of March 27, 1997 and since has not reinstated the measures.

The dispute arose from complaints by Costa Rica which argued that while the Harmonized Tariff Schedule of the United States (HTSUS) provides the basis for a type of outward processing regime which enables products re-imported to the US under the HTSUS with partial exemption from US duties, the transitional safeguard measures imposed by the United States solely on textiles imports from Costa Rica were in violation of the ATC and GATT rules. Accordingly, Costa Rica requested that the Panel, on the basis of Articles 2, 6 and 8 of the ATC, recommend to the United States the immediate withdrawl of the measure. The United States, in turn, requested the Panel to reject Costa Rica's argument as it had complied with the obligations under the ATC.

The major point at issue in the dispute can be classified into 5 categories:
On the standard of review, Costa Rica requested the Panel, based on the general principles of GATT rules and the provisions of the DSU, to undertake an analysis and monitor the following five aspects: compliance with the procedural rules; proper establishment of the facts; objective and impartial evaluation of the facts in the light of the rules of the ATC; proper exercise of discretion in interpretation of the rules; and compliance with the rules. However, the United States argued that the standard of review of the "fur felt hat" case should be applied equally to the pending case and should, accordingly, be based on whether a safeguard action was properly taken at the time that the decision was made.
On the burden of proof, while Costa Rica emphasized that the burden of proof in a dispute settlement proceeding under the DSU for the purpose of determining the consistency of a import restriction measure with Article 6 of the ATC fell upon the importing Member, the United States argued that the burden of proof fell upon Costa Rica.

On Article 6 of the ATC, Costa Rica argued that the United States had failed to comply with the two principles applicable to the adoption of a safeguard measure under Article 6 of the ATC, establishing the sparing application of the transitional safeguard, and the consistent application of the transitional safeguard with the provisions of Article 6.1 of the ATC and the effective implementation of the integration process under the ATC. On the other hand, the United States argued that Article 6 of the ATC did not include more detailed procedures for investigation, nor did it provide more specific definitions to interpret the standard of law to applied and thus the appropriate standard ot apply to the importing country's determination was a standard of reasonableness.

On the determination of serious damage or actual threat thereof, Costa Rica noted that most of the information initially provided by the United States regarding the issue at hand were based on the purported existence of serious damage to the US industry and did not consider the existence of threat of injury. The United States maintained that since the ATC did not provide separate requirements for determinations of threat of injury and, thus, had not been employed in the CITA determination of March 1995, the determination by the United States of serious damage or actual threat of thereof was fully consistent with Articles 6.2 and 6.3 of the ATC.

On the existence of a causal link, Costa Rica claimed that since the United States failed to demonstrate the existence of a causal link between the supposed increase in imports and the supposed serious damage or actual threat of serious damage to the domestic industry, the United States consequently violated Articles 6.2 of the ATC. However, the United States stressed that export restraint settlements with other countries were not within the Panel's terms of reference and thus was not a matter to be considered by the Panel. They argued that the restraint on Costa Rican underwear was imposed in a broader context.

2. Panel Findings
In regard to the major points of issue in the textile dispute between Costa Rica and the United States, the Panel made the following findings:

(ⅰ) the United States violated its obligations under Article 6.2 and 6.4 of the ATC by imposing a restriction on Costa Rican exports without having demonstrated that serious damage of actual threat thereof was caused by such imports to the United States' domestic industry;

(ⅱ) the United States violated its obligations under Article 6.6(d) of the ATC by not granting the more favorable treatment to Costa Rican re-imports contemplated by that sub-paragraph;

(ⅲ) the United States violated its obligations under Article 2.4 of the ATC by imposing a restriction in a manner inconsistent with its obligations under Article 6 of the ATC; and
(ⅳ) the United States violated its obligations under Article Ⅹ:2 of the General Agreement on Tariffs and Trade 1994 and Article 6.10 of the ATC by setting the start ofthe restraint period on the date of the request for consultations, rather than the subsequent date of publication of information about the restraint.

The Panel recommended that the DSB request the United States to bring the measure challenged by Costa Rica into compliance with the United States' obligations under the ATC. The Panel further suggested that the United States bring the measure challenged by Costa Rica into compliance with United States' obligations under the ATC by immediately withdrawing the restriction imposed by the measure.

3. Claims at the Appeals Stage
On November 11, 1996, Costa Rica notified the DSB of the WTO of its decision to appeal certain issues of law covered in the Panel Report and legal interpretations developed by the Panel, pursuant to paragraph 4 of Article 16 of the DSU, and filed a Notice of Appeal with the Appellate Body, pursuant to Rule 20 of the Working Procedures for Appellate Review. Costa Rica's appeal only concerned the Panel's finding recognizing backdating the effectivity of United State's transitional safeguard measure and the Panel's legal interpretation recognizing the imposition of a backdated quota by such a safeguard measure. The United States, on the other hand, argued that a transitional safeguard measure was imposed on Costa Rica pursuant to Article 6.10 of the ATC, stressing that no provisions of the ATC or of the GATT prohibits the setting as the initial date of a transitional safeguard measure of the date of the public notice announcing the request for consultations.

4. Appellate Body's Findings
With regard to the issues raised in the appeal, the Appellate Body found that the Panel erred in law on the issue relating to the setting of the initial date of the transitional safeguard measure. In addition, it concluded that the Panel went outside the limits of the ATC by taking its assumed premise literally that Article 6.10 is "silent about the initial date from which the restraint period should be conducted" and describing the issue as "a technical question regarding the opening date of a quota period". However, the Appellate Body's conclusion leaves intact the conclusions of the Panel that were not the subject of appeal. Therefore, the Appellate Body recommended that the DSB request the United States to bring its measure restricting Costa Rican exports of cotton and man-made fibre underwear into conformity with its obligations under the ATC.

5. Implications
The dispute provides standards and guidelines on various legal and economic issues for future disputes. In addition, it provides various implications for developing countries in utilizing the WTO dispute settlement procedure by affirming the effectiveness and credibility of the procedure.
As a legal issue, the Panel's findings clearly prohibits retroactive application of the effectivity of a safeguard measure and reaffirms the need to prove the existence of increase in imports and serious damage or actual threat thereof prior to imposing a transitional safeguard measure. Also, the findings and conclusions in this dispute has become a precedent case which stresses the importance of Article Ⅲ: 2 of the GATT 1994 in order to apply an appropriate legal analysis.

With respect to the economic aspects, an importing country must render Most-Favored Nations treatment to the re-imported products, while providing a clear standard of review in showing damage to the domestic industry. Moreover, Article 6.2 of the ATC provides that an importing country must not only provide proof of burdenin determining serious damage or actual threat thereof, but also demonstrate the existence of a causal link between the supposed increase in imports and the supposed serious damage or actual threat of serious damage to the domestic industry.

Institutionalizing International Emissions Trading Under the Kyoto Protocol: Implications for KoreaAeree Kim

The international community reached agreement at the Kyoto Conference to reduce green house emissions through an emissions trading system. Following adoption of the Kyoto Protocol, the operational methods and implementation mechanisms of the emissions trading system became the subject of intense debate. At the 4th Conference of Party (COP-4) held in Buenos Aires, Argentina in 1998, a detailed work plan for an emissions trading system was agreed upon.
At this conference, Korea announced its intention to first reduce green house gas emissions on a voluntary basis and then, beginning in the third implementation period (2018∼2022) of the Kyoto Protocol, become subject to the legally binding emissions reduction target. Joining the Kyoto Protocol, however, presents significant challenges to Korea, the greatest of which are presented by ever-increasing domestic energy demand and an industrial structure dominated by manufacturers that inefficiently consume high amounts of energy. Thus, there is an urgent need for Korea to develop multi-dimensional strategies to reduce green house gases. In doing so, Korea must fully understand and involve itself in the current debate concerning actual implementation of the Kyoto Protocol.

Under the framework of the emissions trading system, a ceiling on allowable worldwide emissions is established. From this ceiling, individual emissions quotas are established for each country. Any excess or shortfall emissions may then be traded with other countries. The hope is that through such a trading system, green house emissions targets can be efficiently realized.

There are already some emissions trading systems operating around the world. An SO2 emissions trading system in the US has contributed to a successful and efficient reduction of SO2 emissions. The success of this program is attributed to a comprehensive yet thorough monitoring and implementation system. Also, through first establishing a clear set of procedures and regulations concerning trading and monitoring, the US system has achieved a high level of transparency and a reliable market mechanism. The criteria of emissions trading regulations were little changed following inception of the system, which has further contributed to stable market prices.

However, not all attempts to reduce unwanted emissions through a system of trade have been so successful. One of the main obstacles to success in other countries is difficulty in converting from the former system of environment regulations that emphasized strict caps on individual polluters to the more flexible emissions trading system.

Norway is one of only a few countries that impose a CO2 tax. Despite a widespread desire to convert its current direct tax into an emissions trading system, such hope has yet to be realized. The main obstacle is that conversion to an emissions trading system would lower government tax revenues. Those supporting emissions trading counter that the system would allow greater production levels than under the former system as trading would more efficiently allocate gases to those industries most in need of emissions producing materials. In addition, some of those supporting the introduction of emissions trading further propose a free allocation by the government to those emitters likely to suffer the greatest under the new system. Preceding emissions trading with free allocation of emissions allowances would reduce production losses and adjustment costs the new system would potentially inflict.

Even if formal agreement regarding an emissions trading system reached, this does not ensure effective implementation. Despite Switzerland's implementation of an emissions trading system for volatile organic compounds (VOCs) five years previously, the trade of such emissions remains insubstantial. The lack of vitality in the market is largely attributed to frequent change of emissions regulation criteria. Further preventing effective implementation are complex trade procedures and inflexible market operations.

In addition to the examples of success and difficulties of emissions trading be observed at the domestic level, the Montreal and Oslo Protocols represent two examples on emissions trading being implemented at the international level. While they provide much applicable knowledge in institutionalizing emissions trading under the Kyoto Protocol, there are differences between these two protocols and the Kyoto protocol. For example, in the Montreal protocol, which was adopted to control ozone depleting substances (ODS), the number of emissions sources is small. Accordingly, transaction costs are low and monitoring is relatively easy. On the contrary, emissions sources of green house gases are diverse and numerous. Thus, in order to reduce transaction cost and monitor the emissions thoroughly, streaming down the kinds and the number of emissions sources should be considered.

Despite the promise of meeting green house gas reduction targets through trading emissions allowances, many components of the trading system remain controversial. Developing countries accuse the system of lacking equity and transparency. Many countries also insist that the emissions trading system be only supplemental to real emissions reduction in each individual country. Also, there is the problem of transparency due to the difficulties in monitoring procedures and measuring some green house gases. In its operational methods and implementation mechanisms, such as participation of the private sector, reporting and monitoring and punitive measures for non-compliance need to be developed further.

One of the most pressing issues is disagreement regarding a ceiling on the total amount of emissions any country may trade. The EU continues to insist on the need for a ceiling while the US maintains that any restraints on trading will distort market principles and weaken the cost efficiency of reducing green house gases. Specifically, the EU insists that hot air, the term used to denote the amount which actual green house emissions of Russia and Eastern European countries during the first implementation period (2008-2012) fall below 1990 levels, not be included in the international trading market.

The EU desire to prevent hot air from being traded is based on the belief that it goes against the underlying principle of the Kyoto Conference, which is the reduction of green house gases. The EU also contends that hot air trade will fail to encourage development of the needed technology for emissions reduction. Furthermore, the EU claims that no reliable figures of 1990 emissions by Eastern Europe and Russia exist, thus accurate assessment of hot air is difficult.
Aside from these components, the level of participation must be decided. In order to carry out precise monitoring, a system that designates which private entities may be involved in emissions trading must be devised. Furthermore, a formal market must be established through which formal emissions brokering activities may take place. As mentioned earlier, the number and range of green house gas emitters is enormous. Thus, to enable efficient monitoring, facilitate market transparency and the exchange of information, a formal location of exchange needs to be established.

As for the issue of non-compliance, liability and punitive measures remain unsettled. Consensus has been achieved to some extent that responsibility for non-compliance should ultimately fall to the country selling a portion of its allotted emissions allowance. Giving responsibility to the seller rather than the buyer spreads incentive to meet quotas and will likely lead to side agreements insuring buyer compliance with emissions quotas. Periodic deadlines must also be established when compliance may be measured.

Emissions trading under the Kyoto protocol may face potential conflicts with the WTO as limiting trade within Annex 1 countries (developed economies) and the quota system may be found in violation of GATT's 'non-discriminatory trade principles.' However, the emissions trading system would fall under WTO rules only when emissions allowances are classified as a commodity rather than capital assets. As confrontation between the respective legal systems of the Kyoto Protocol and the WTO is likely, a method of resolving such disputes must be devised.

The international emissions trading system on green house gases is on the verge of being realized. At the COP-4, member countries agreed to reach a final decision concerning the flexibility mechanism by the year 2000. As debate on institutionalizing the international emissions trading proceeds, Korea must formulate strategies as to how to integrate itself into the coming global emissions trading system. The first step in preparation of joining the trading system is to introduce an emissions trading system domestically. Emissions trading has shown great success in efficiently reducing emissions and Korea should learn from the already existent examples. Green house gas reduction also provides an opportunity to boost industrial competitiveness through reducing energy waste. On the other hand, failure to initially introduce an emissions trading system domestically will put Korea at a disadvantage once it begins participating in the international emissions trading market.

Along with the introduction of an emissions trading system at the domestic level, it is imperative that Korea be engaged actively in international debates concerning emissions trading. Such involvement will not only allow Korea to share in molding the system in which it will soon participate, it will also provide Korea with the information needed to establish domestically the optimal emissions program. Presumably, this is the intent of the Kyoto Protocol-to provide each country with the necessary impetus to realize development that is sustainable, more effective.

A Case Study on the WTO Dispute Settlement Mechanism:U.S.-Measure Affecting Imports of Wooven Wool Shirts and Blouses from India

1. Claims at the Panel Stage
India claimed that the United States violated Article 6 of the Agreement on Textile and Clothing ("ATC") in imposing the safeguard measure. India brought the matter before the DSB, arguing that the United States nullified or impaired benifits accruing to India under the ATC. However, the United States rejected those claims, arguing that it had complied with all the requirements of Article 6 of the ATC. Major issues in the dispute are as follows:
On the issue of burden of proof, India argued that, since the transitional safeguard measure taken by the the exceptions. On the other hand, the United States argued that India, as the party making the claim, bore the burden of presenting a prima facie case of violation before panel.
On the issue of standard of review, India argued that the task of the Panel was to determine whether the United States had observed the requirements of Article 6 in good faith, not whether it had acted reasonably. On the other hand, the United States responded that the task of the Panel was to consider whether the US authorities could reasonably and in good faith have determined that serious damage or actual threat thereof existed, not whether serious damage or actual threat thereof existed as such.
On the role of the Textiles Monitoring Board("TMB"), India asserted that the United States had failed to obtain the endorsement by the TMB of the proposed safeguard measure. On the substantive requirements of Article 6 of the ATC, India argued that the US determination had not met the requirements of Article 6 of the ATC in terms of economic factors and data to be considered for determination of serious damage or actual threat thereof as well as causation. The United States rejected the claims, arguing that it had complied with all the requirements of Article 6 of the ATC.

2. Panel Findings
The Panel supported the main claims of India, and made the following principal findings and conclusions:
o On burden of proof, the Panel found that since India was the party that initiated the dispute settlement proceedings, it was for India to put forward factual and legal arguments in order to establish that the US restriction was inconsistent with Article 2 of the ATC and that the US determination was inconsistent with Article 6 of the ATC;
o On the standard of review, the Panel found that its function was limited to making an objective assessment of the facts surrounding the application of the specific restraint by the United States, and of the conformity of such restraint with the relevant WTO agreements;o On the role of the TMB and DSU processes, the Panel concluded that its was required to make an objective assessment as to whether the United Sates respected the conditions of Article 6.2 and 6.3 of the ATC at the time of the determination by the United States;o On the substantive requirements of Article 6 of the ATC, the Panel found that the United States had not met its obligations, since of the eleven economic criteria mentioned in Article 6.3 of the ATC, no information or comment was provided by the United States in respect of productivity, inventories and exports;

3. Claims at the Appeals Stage
Although India agreed with the overall conclusions of the Panel, it appealed certain of its findings of law:
o on burden of proof, India contested the Panel's finding that India had the obligation to establish that the United States had violated Article 6 of the ATC, or that it had the obligation to present a prima facie case to that effect;
o on the relationship between the TMB and the DSU process, India asserted that the Panel's finding on TMB powers denied exporting Members two important procedural rights:the right to hold consultations on a proposed transitional safeguard action on the basis of specific and factual information, and the right to a review of a transitional safeguard action by the TMB.
o on the general powers of the TMB, India asserted that the Panel made statements giving the TMB powers that went far beyond those attributed to it by the ATC.
o on whether the Panel should have made findings on all the issues raised, India argued that the determination on the two issues that the Panel did not make findings on was necessary to resolve the dispute.
The United States disagreed with India's claims, arguing that:
o the Panel correctly required India to meet the burden of going forward with the evidence;
o the Panel's discussion of the TMB and its powers was mere obiter dicta, and that in any case nothing in the text of the ATC supported India's assertion; and
o the Panel did not err by declining to rule on all claims made by India.

4. Appollate Body's Findings
The Appellate Body upheld all the Panel findings under appeal. In particular:
o On burden of proof, it agreed with the Panel that it was for India to present evidence of an argument sufficient to establish a presumption that the transitional safeguard determination by the United States was inconsistent with its obligations under Article 6 of the ATC;
o On the relationship between the TMB and the DSU, the Appellate Body did not consider the comment by the Panel on this issue to be "a legal finding or conclusion" which the Appellate Body" may uphold, modify or reverse"; and
o On the issue of judicial economy, the Appellate Body agreed with the Panel that nothing in Article 11 of the DSU required the panel to examine all legal claims made by the complaining party.

5. Implications
The dispute provides good guidelines for developing relevant logics in the future disputes regarding the legal and economic issues as follows;
First, it is found that the party initiating a dispute settlement proceeding has the burden of putting forward factual and legal arguments in order to establish its case, while the defending party as respondent has the burden of demonstrating that it has complied with the relevant conditions of application of the provisions which it invoked.
Second, in establishing damages, all the relevant variables including those specified in the relevant provisions should be examined in order to provide an accurate picture of the dynamics of the industry concerned. In doing that, the reliability and representativeness of the data is crucial.
Third, in order to justifiably impose a restraint, it is crucial to establish that an increase in imports, not some other factors, is causing serious damage or actual threat thereof in the domestic industry. To prove it, it is strongly desired to make comparison between the current situation and the situation in the absence of the import surge, which may require econometric analysis to forecast future trends in various economic indices.

Present Condition, Problems and ProgressingDirection of Chinese State-owned Enterprises' ReformSuk-Heung Suh
This study arranges progressing process, present condition of Chinese state-owned enterprises' reform, and management state and performance of state-owned enterprises and investigates new progressing direction of reform since the 15th Party Conference.

Chinese state-owned enterprises have failed in changing management mechanism and improving management state in spite of various reform efforts made until now. So in the 15th Party Conference, Jangzemin, general secretary, offered general reform plan based on 'reform and reorganization'.

Its essential contents are as follows. The first is reforming traditional enterprise management system and management mechanism in terms of individual state-owned enterprise, making modern enterprise substance aiming market economy. The second is in terms of general state-owned economy reorganizing state-owned enterprise's arrangement stategically, Which is dispersed too widely. The motive of this 'reforming and reorganizing' comes from the recognition that state-owned enterprise is suffering from difficulty because of (1)state-owned enterprise's irrational management mechanism and (2)irrational arrangement of limited state-owned capital.

It is expected that from now according to this plan the changing into stock companies of the large and medium sized state-owned enterprises will accelerate. It must be true that the changing into stock companies of the large and medium sized state-owned enterprises will more clarify property-right relation and expand management autonomy. But the problem is suggested not only the simple expanding of stock companies but also how they will realize mechamism change that is, the original purpose of stock company.

In addition, it is expected that they will greatly reorganize state-owned economy and actively propel enterprises group fostering policy through the unification and M&A of enterprises. Especially China has set the goal at fostering five to ten international super-large enterprises groups. And also it is expected that such phenomena will be more full scale as bankruptcy of insolvent enterprises and changing into share-holding cooperative enterprises, selling or lease to private person of medium and small sized state-owned enterprises. It is expected that in this process by the inevitable lay-off of surplus employees, there will be considerable social agitation and trouble.