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Petroleum Industry Diversification in the Middle East and Its Policy Implications for Korea in the Era of Energy Transition
The aim of this research is to examine various mid-to-long term plans, policies, and business cooperation cases to promote diversification in the Middle Eastern petroleum industry, suggesting policy proposals for cooperation betwe..
Kwon Hyung Lee et al. Date 2021.12.30
Economic cooperation, Energy industry Africa Middle EastDownloadContentSummary정책연구브리핑The aim of this research is to examine various mid-to-long term plans, policies, and business cooperation cases to promote diversification in the Middle Eastern petroleum industry, suggesting policy proposals for cooperation between Korea and the Middle East to deepen industrial diversification in the region.Chapter 2 analyzes global factors that have influenced the oil industry, and examines the trends of diversification in the oil industry and characteristics of diversification in major countries. Increasing oil price volatility and the expanding efforts of the international community to make a transition to a carbon-neutral economy have acted as a factor in diversifying the oil industry. As the trend of low oil prices has continued since the second half of 2014, the raw materials for manufacturing petrochemical products have become available at cheaper prices, and this has led to increased investment in downstream sectors such as oil refining and petrochemicals. In addition, as efforts to reduce carbon emissions in the oil industry have expanded, the share of natural gas production increased, investment in hydrogen and carbon reduction technology expanded, and digital technology was actively introduced to increase the efficiency of oil industry operations. In the downstream sector, the United States is focusing on ethylene production using ethane derived from shale gas, and China is continuing its efforts to expand facilities and diversify feed stocks to improve its own production capacity. In the area of hydrogen and carbon reduction, European countries such as Norway and Germany, along with the United States, China, and Russia, are increasing investments in hydrogen utilization and green hydrogen technology development. Efforts in the area of digital technology can be characterized by the introduction of oil field technology in segments such as oil field exploration and development, transportation and storage by multinational oil companies in the United States and Norway.Chapter 3 examines government policies, competitive advantage, and risk factors for the diversification of the oil industry in the Middle East. Saudi Arabia and the UAE are engaged in various mid to long-term plans and strategies aimed at reorganizing the structure of the oil industry, recognizing it as a key industry that is overly biased toward the upstream sector. First of all, the two countries are investing in the petrochemical sector, which is expected to increase in demand even in the era of carbon neutrality. Saudi Arabia is expanding its production capacity of basic and intermediate chemicals through various investments, including the establishment of joint ventures with foreign companies. The UAE has a relatively low production capacity for feedstock and basic chemicals, but has the advantage of diverse products such as plastics and fertilizers. Saudi Arabia and the UAE are also expanding their blue and green hydrogen production capabilities in line with the global demand for green energy. In particular, the Saudi government intends to move early into the hydrogen market by pushing for blue hydrogen exports through Aramco while also advancing the possible production time of green hydrogen. The UAE is still focusing on expanding the production of blue hydrogen, but it has the advantage of having high price competitiveness in green hydrogen and the capacity to produce pink hydrogen using nuclear power. In addition, Saudi Arabia and the UAE are actively promoting the introduction and utilization of digital services or solutions for the digital transformation of the oil industry. However, due to the lack of overall technology to diversify the oil industry in both countries, cooperation with foreign companies is necessary to secure competitiveness and develop technologies.Chapter 4 reviews the direction of external cooperation for diversification of the oil industry and examines specific examples by sector such as petrochemical, hydrogen, CCUS, and digital technology. Saudi Arabia and the UAE are increasing petrochemical or oil refining projects jointly promoted by establishing joint ventures in major overseas export base countries to stably export oil and create added value. Saudi Arabia has acquired stakes in major overseas oil refiners and petrochemical companies or expanded joint investments to secure a stable market for its own crude oil, and has also pushed for equity investments and joint ventures in Korean companies. The UAE is promoting entry into promising overseas markets in the petrochemical sector, while focusing on attracting foreign companies into its domestic market. In addition, both Saudi Arabia and the UAE are actively developing hydrogen based on abundant natural gas and renewable energy. The two countries are promoting cooperation with a focus on exporting hydrogen, based on the price competitiveness of hydrogen produced in their own countries. As major crude oil importers of the two countries, Korea and Japan have been important partners of this cooperation. In the introduction of digital technology, cooperation with US and European companies has been remarkable. Saudi Arabia and the UAE are found to be mainly utilizing solutions for production optimization, integrated supply chain management, asset monitoring and predictive analysis, and safety and efficiency improvement through US and European companies. The two countries plan to foster their own industries and increase job creation by establishing local joint venture companies with global companies and expanding joint R&D.Chapter 5 suggests cooperation policy proposals to further promote industrial diversification in the Middle Eastern petroleum industry. Although Korea and Middle Eastern oil exporters have different industrial environments in the sector, they pursue the same policy goal to attain carbon neutrality. This is the common foundation on which both regions could establish a new energy security cooperation regime. First, stable supply and demand of low carbon energy resources such as hydrogen should be established between Korea and Middle Eastern oil exporters for carbon neutrality and hydrogen economy. For this, both regions need to establish long-term supply contracts on the condition that Korean companies construct the hydrogen production facilities involved. Establishing a Korea-Middle East carbon neutrality fund would ease the financial burden for construction projects. Second, new energy businesses responding to the electrification of energy should be promoted to enhance energy efficiency in national power systems. Consulting projects to establish master plans for efficient power infrastructure and demonstration projects to evaluate consulting results should be conducted, as infrastructure remodelling consumes large amounts of financial resources. Moreover, these projects will require government-to- government cooperation based on mid-to-long term mutual interests. Third, technology collaboration between the two regions should be advanced to attain carbon neutrality. More technological breakthroughs in the sectors of hydrogen production and carbon reduction need to be obtained for future cooperation. Joint study agreements for technology development and a joint research platform should be established for active interaction and mutually beneficial assistance between the two regions. This could be developed into a joint venture for production and sales. -
Japan’s New Trade Strategy Amid U.S-China Confrontation
This research was conducted with the purpose of providing implications for the Korean government and companies amidst the growing US-China conflict by analyzing the trade strategies of a country that shares similar in..
Gyupan Kim et al. Date 2021.12.30
Trade policy, Overseas direct investment JapanDownloadContentSummary정책연구브리핑This research was conducted with the purpose of providing implications for the Korean government and companies amidst the growing US-China conflict by analyzing the trade strategies of a country that shares similar international settings with Korea: Japan.Chapter 2, “US-China Decoupling and China’s Response,” examines US-China decoupling policy, focusing on tariff imposition, export control, technology transfers, foreign investment controls, and government procurement. This study reveals that, although US-China economic relations have deteriorated to the point of partial decoupling or disengagement in high-tech sectors and other select areas of supply chains, it certainly is not up to the level of the US’s containment of the Soviet bloc in the traditional Cold War sense.Chapter 3, “Japan’s Reshaping of the Global Supply Network: Focusing on China,” attempts to verify whether the “China risk”—a notion that has been actively promoted by some in Japan since US-China frictions intensified in 2018, and escalated with the spread of COVID-19 in 2020—actually took place, and evaluates Japan’s “China+1” policy, which is the country’s hedging strategy toward China. The results reveal that although Japan’s import dependence on Chins is significantly high for some import products, this does not seem to bear any serious risk for Japan in that the said products can easily be substituted with imports from other countries.Chapter 4, “Japan’s Economic Security Strategy,” looks into Japan’s new economic security policy, focusing on Japan’s economic statecraft, reinforcing resilient supply chains and strategically important industries, and strengthening global supply chain with its “allies.”Chapter 5, “Japan’s China Policy and Trade Strategy,” reveals that Japan’s position on China’s Belt and Road Initiative and the Asia Infrastructure Investment Bank (AIIB) is somewhat far from the level of containment that the US is demanding of its allies, due possibly to Japan’s strong economic ties to China, or its peace constitution. Regarding Japan’s trade strategy, this study speculates that Japan, while promoting free and fair trade and cooperation with like-minded partners, will try to take the lead in shaping international norms on the emerging trade areas of environment, human rights and labor, and digital trade.The research concludes with Chapter 6, which provides conclusions and political implications for the Korean government and companies. -
The ASEAN Community in the Post COVID-19 era: Challenges and Policy Implications
This report evaluates the performance of the three pillars of the ASEAN community―the Political-Security, Economic, and SocioCultural pillars―at the halfway point of the blueprint to build the ASEAN Community by 202..
Meeryung La et al. Date 2021.12.30
Economic cooperation, International politics Southeast Asia OceanDownloadContentSummary정책연구브리핑This report evaluates the performance of the three pillars of the ASEAN community―the Political-Security, Economic, and SocioCultural pillars―at the halfway point of the blueprint to build the ASEAN Community by 2025. The paper also analyzes the impact of the COVID-19 pandemic on the ASEAN Community and comprehensively addresses the existing and newly encountered challenges of ASEAN in the COVID-19 era. Based on these analyses, we derive policy recommendations for cooperation between ASEAN and Korea to support recovery from COVID-19 and successful progress of the ASEAN Community.ASEAN established the ASEAN Community in 2015 and adopted the three blueprints set out in the strategic measures to build Socio-Cultural, Political-Security, and Economic communities by 2025. Chapter 2 introduces the ASEAN Community’s goals and work plans guided by APSC, AEC, and ASCC blueprints, and examined the implementation mechanism to pursue the various measures. We also review the contents and significance of the ASEAN Comprehensive Recovery Framework (ACRF), which is a COVID-19 exit strategy at the ASEAN level, and present our forecasts on the future of the ASEAN Community after COVID-19.In Chapter 3, this paper evaluates the progress of ASEAN economic integration and examined environmental changes caused by COVID-19, and the challenges faced by ASEAN subsequently. According to the results of this study, AEC’s goal of establishing a “highly integrated and cohesive economy” has been successfully implemented in accordance with its work plan, but the actual economic performance appear to fall short of expectations. Therefore, we identify the factors that hinder ASEAN's economic integration and further present ASEAN's challenges to solve them.Chapter 4 analyzes the performance of the ASEAN Political-Security Community (APSC) and examines the prospects of the APSC after COVID-19. First, we reviewed the main contents of the APSC Mid-term Review Report released by the ASEAN Secretariat, and analyzed the fundamental limitations of the APSC blueprint 2025. Then we analyzed the impact of COVID-19 on the building of APSC. Unlike the AEC and ASCC, it is difficult to say that COVID-19 directly affected the APSC’s progress and accomplishments. Nevertheless, the COVID-19 crisis has resulted in accelerating the existing challenges faced by the APSC, including the U.S.-China competition and the regression of democracy in ASEAN member states. In this respect, this chapter analyzed the impact of COVID-19 on the political and security environment in Southeast Asia and the challenges accordingly.In Chapter 5, this study analyzes the performance of the ASEAN Socio-Cultural Community (ASCC) and examined the pending issues after COVID-19. ASCC includes a wide range of cooperation areas, but there is no implementation mechanism that encompasses them;furthermore it is difficult to secure its own driving force. The field of the ASCC tends to be recognized as a national-level issue intrinsically, which acts to limit the implementation of cooperative projects at the regional level. This study examined the limitations of ASCC described above and analyzed the challenges faced by the ASCC amidst COVID-19.Finally, Chapter 6 provided policy directions for cooperation between ASEAN and Korea, and suggested measures that contribute to the progress of the AEC, APSC, and ASCC in the post-COVID-19 era. -
Economic Sanctions against North Korea: Theory and Evidence
The United Nations Security Council adopted eight resolutions from 2012 to 2019, in response to the threats posed by North Korea’s tests of ballistic missiles and nuclear weapons. In this study, we first theoreticall..
Youngseok Park et al. Date 2021.12.30
International security, North Korean economy North KoreaDownloadContentSummary정책연구브리핑The United Nations Security Council adopted eight resolutions from 2012 to 2019, in response to the threats posed by North Korea’s tests of ballistic missiles and nuclear weapons. In this study, we first theoretically define North Korea’s political system, and then develop a dynamic game of sanctions against North Korea. Second, using satellite nighttime lights data, we empirically investigate how the ruler (regime) allocates the country’s resources to stay in power as sanctions intensify.The political system of North Korea is defined as a suryong dictatorship, in which the dictator (supreme leader, or suryong) has the absolute power to dictate the country’s resources, including its people. The theoretical definition of the North Korean political system is based on De Mesquita et al. (2005)’s selectorate theory. In light of the selectorate theory, the North Korean regime successfully divides the country’s residents into two segregated groups, the selectorate (elites) and the non-selectorate. The North Korean regime strictly restricts migration within the country, and takes special care of the capital city, Pyongyang. The regime selectively grants the right to reside in Pyongyang. Moreover, it is well known that the regime prioritizes Pyongyang citizens’ welfare and allocates resources to them first and foremost. Acemoglu et al. (2004) define kleptocracy as a political system where the state is controlled and run for the benefit of an individual, or a small group, who use their power to transfer a large fraction of the society’s resources to themselves. They suggest the divide-and-rule strategy as a method that kleptocratic rulers use to stay in power. The divide-and-rule strategy makes it difficult for residents to obtain enough social coordination for revolution against the kleptocratic ruler. On the basis of the evidence and data, we define North Korea’s suryong dictatorship as a kleptocracy.We present a game-theoretical model (a dynamic game) of sanctions on kleptocracy. The kleptocratic ruler stays in power by taxing divided groups of citizens and redistributing the revenues. We assume that only the selectorate can initiate a revolution against the ruler, as the citizens of the selectorate are more educated and productive than the citizens of the non-selectorate. The kleptocratic ruler possesses weapons of massive destruction (WMD). A superpower country can impose economic sanctions on the kleptocratic country to deter the ruler from developing WMDs. The model is expected to have results as follows. If the superpower country imposes economic sanctions on the kleptocratic regime, the citizens are incentivized to initiate a revolution against the kleptocratic ruler. Then the ruler will respond with taxing-and-spending (setting tax rates and amount of transfers to each group), so that he can offset the incentives of revolution against himself caused by the sanctions. Therefore, the ruler is expected to transfer a greater fraction of the country’s resources to the selectorate as sanctions intensify.Next, we empirically test the theoretical hypothesis using satellite nighttime lights data. We use the VIIRS satellite nighttime lights data to proxy for local economic activity in North Korea in the empirical analysis. We find that an additional sanction is associated with an increase in the difference in nighttime lights between the capital city, Pyongyang, and the rest of the country by about 0.4 percent. This implies that the GDP gap between Pyongyang and the rest of the country increases by about 0.12 percent with an additional sanctions event. Manufacturing cities, mining areas, the Chinese border region, and Sinuiju become relatively brighter with an additional sanctions event. The magnitude of the estimate is particularly strong for Sinuiju. Another notable finding is the estimate on the interaction term with the nuclear development facilities areas, which suggests that the ruler diverts resources and electricity from nuclear development activities to other sectors when sanctions increase. In conclusion, the base regression results confirm the theoretical hypothesis. -
Analysis of Chinese Response Patterns to Diplomatic Friction and Its Influencing Factors
Jaichul Heo et al. Date 2021.12.30
International politics, Chinese politics China -
The Policy Direction of International Organizations on Immovable Property Tax and Its Impact on the Macro Economy
Since the 2008 global financial crisis, inequality has been increasing worldwide. In particular, levels of wealth (asset) inequality are increasing further than income inequality. And Korea is no exception. This deepe..
Young Sik Jeong et al. Date 2021.12.30
Financial policy, Tax systemDownloadContentSummary정책연구브리핑Since the 2008 global financial crisis, inequality has been increasing worldwide. In particular, levels of wealth (asset) inequality are increasing further than income inequality. And Korea is no exception. This deepening of inequality is more worrisome in that it leads to inequality of opportunity while suppressing movement between classes, which in turn deepens inequality, creating a vicious cycle of inequality. This is a bigger problem than the inequality itself. The international communities are calling for stronger property taxes, including recurrent taxes on immovable property, as part of mitigating inequality and promoting inclusive growth. In Korea, there is heated discussion on property taxes, such as recurrent taxes on immovable property including the comprehensive real estate tax. Therefore, this study aims to investigate policy directions in international organizations and major countries on immovable property tax and examine the effect of property tax on the macro economy.This study consists of four parts. In Chapter 2, we examine the direction of international organizations’ tax policy on immovable property and the current real estate tax system of major countries. The international communities, represented by organizations such as the OECD, World Bank, and IMF, have been calling for stronger property taxes, such as recurrent taxes on immovable property, since the global financial crisis in 2008, and this trend has continued even after the COVID-19 pandemic in 2020. In particular, the introduction or reinforcement of a wealth tax, a new type of property tax, has recently become an issue of discussion. When comparing the real estate taxation systems of Korea, the United States, the United Kingdom, Canada, and Singapore, several characteristics become evident for Korea. In terms of the purpose of imposing immovable property tax, these major economies and Korea share the aim of securing local government finances, but the difference is that the international communities are focusing more on inclusive growth and improving inequality, while Korea is more focused on stabilizing the real estate market. As for the tax rate structure, countries except Singapore have a proportional tax rate system, whereas Korea operates an excess progressive tax rate system. It is also characteristic that Korea evaluates the value of real estate based on market price every year. On the other hand, with the exception of some countries, Korea and major countries have in common that the immovable property tax is a local tax, the taxpayer is the owner, the property tax deduction and tax exemption system exist, and the taxable value is based on the total value of the house.In Chapter 3, this study examines international comparisons of immovable property tax burdens using OECD data. First, in terms of time series for OECD countries, the average immovable property tax ratio (to GDP or total tax) has risen since the 2008 financial crisis. The ratio of financial and capital transaction taxes showed a relatively large drop, and inheritance and gift taxes ratio showed a sideways trend. In Korea, the immovable property tax ratio is also showing a modest increase. The ratio of transaction taxes, including real estate acquisition and registration tax, generally flattened during fluctuations, while that of inheritance and gift tax showed a steady rise. Next, in terms of cross-sectional comparison, Korea's immovable property tax ratio was lower than the OECD average level. Based on the effective immovable property tax ratio (immovable property tax revenues to total private real estate assets), which is an indicator of the actual tax burden on immovable property, the average of 15 OECD countries was 0.30%, while Korea recorded 0.17% in 2019. This seems to be due to the relatively high real estate price level, low tax base realization rate, and low immovable property tax rate in Korea. In 2019, Korea's private real estate market capitalization to GDP ratio was 5.54 times, the highest among comparable countries, far exceeding the average of 15 OECD countries (3.75 times). Meanwhile, in the case of financial and capital transaction taxes, inheritance and gift taxes, Korea recorded 1.75% and 0.43% of GDP, respectively, higher than the OECD average of 0.44% and 0.12%. In terms of total property taxes to GDP ratio, Korea recorded 3.12%, which is higher than the OECD average (1.85%).In Chapter 4, we analyze the effect of immovable property tax on housing prices in OECD countries using the dynamic panel model. According to the results of the analysis, an increase in the immovable property tax has a negative impact on the real housing price change rate, Price to Income Ratio (PIR), and Price to Rent Ratio (PRR). This seems to be because the strengthening of the immovable property tax raises the cost of owning a house, which increases pressure to sell houses or weakens the motivation to purchase houses. In particular, the fact that the strengthening of immovable property tax has the effect of lowering not only real housing price but also PIR and PRR has great significance in that it lowers the risk of a bubble in the real estate market. On the other hand, an increase in financial and capital transaction taxes has a positive impact on the real housing price increase rate, PIR, and PRR. This seems to be because the strengthening of transaction tax has a greater effect on deterring housing sales than the effect of weakening housing purchases.In Chapter 5, we investigate how the increase in property tax affects income inequality and economic growth in OECD countries. The analysis is conducted using a country and year fixed effect model, two-stage least squares, generalized method of moments, and three-stage least squares. According to the empirical result, an increase in immovable property tax is closely associated with decrease in income inequality, and at the same time, an increase in property tax can have a negative impact on short-term economic growth. We also find that the increase in income inequality does not lead to an increase in property tax. This decision-making behavior seems to be related to the OECD's policy recommendation to use the property tax as a means to improve income inequality.In Chapter 6, we present policy implications for Korea. First, in terms of the purpose of real estate policy, the Korean policy authorities need to shift toward a more fundamental and broader perspective, such as inclusive growth and sustainable growth, which the international communities are emphasizing, rather than the Korean government’s current focus on stabilizing the real estate market. This change in perception of real estate policy is very important in that it lays the foundation for more fundamental, continuous, and systematic real estate policy. Second, in terms of the real estate tax system, the policy direction and mix of gradually raising the immovable property tax and lowering transaction tax at the same time should be consistently pursued in order to achieve stability in the real estate market, inclusive growth, and sustainable growth. Finally, when improving the property tax system in the future, Korea's unique characteristics – such as a very high real estate price level, the jeonse system, and a low ratio of self-owned houses compared to major countries – should be taken into consideration. -
US-China Conflict, the Analysis on Europe’s Perceptions and Relations with the US and China: Historical Study and Prospects
With the advent of the era of G2, where the U.S.-China hegemony competition intensifies, many countries are struggling to build relations with the US and China. The European Union (EU) has maintained a close political..
Seung-Keun Lee et al. Date 2021.12.30
Political economy, International politics EuropeDownloadContentSummaryWith the advent of the era of G2, where the U.S.-China hegemony competition intensifies, many countries are struggling to build relations with the US and China. The European Union (EU) has maintained a close political, security and economic ties with the US. The EU shares identical security vision with the US. In contrast, the EU defined its relations with China as a cooperation partner, competitor and rival. It refers to the EU’s multifaceted relations with China. In climate change, multilateral trades and normative areas, the EU seeks to cooperate with China. However, the EU prompts profit balance through negotiations in the economic sector. Against this backdrop, the EU introduced a concept called ‘strategic autonomy’ by synthesizing the path dependence, Europe’s confronting issues and the EU’s strength and values regarding its relations with the US and China. The EU’s responses to the US-China conflicts are worth further attention.EU-US relations are based on Atlanticism, emphasizing the importance of bilateral cooperation based on identical civilization. Atlanticism emerged mainly in Britain in the 19th century as a concept encompassing democracy and the development of Western civilization. After World War II, it was embodied in the “Atlantic Alliance” formation, and NATO was launched in 1949. The establishment of the post-war European order began by the US’ Marshall Plan. In Europe, France pushed for independent economic reconstruction in 1951 by establishing European Coal and Steel Community (ECSC). In this process, confrontations between European countries were expressed by conflicts between British-centered “Atlanticism,” which values building relations with the United States, and French-centered “Europeanism,” which calls for Europeans to lead the establishment of European order. Since the end of the Cold War, on the one hand, Atlanticism has weakened relatively in the context of trans-Atlantic relations.Europeanism has recently re-emerged due to the expansion of the autonomous cooperation of European States. The clash between Atlanticism and Europeanism intensified, centered on the conflicts between UK/US and France, as Europe-US relations has been established as a ‘competitive and symbiotic relationship’. In January 2017, the emergence of the Trump administration, which promotes US priority and neo-isolationism, served as a decisive opportunity for cracks in the Atlantic Alliance.In terms of economic relations, the United States and the EU are the world’s first and second-largest economies, accounting for 42.7% of the world’s GDP and 29.1% of trade, respectively. They are mutually important trading and investment partners. In this situation, the two sides negotiated the FTA during the 2013-16 period, but it was suspended after the inauguration of the Trump administration, and bilateral trade relations rapidly deteriorated with the emergence of protection trade measures. Simultaneously, China led the establishment of the Asian Infrastructure Investment Bank (AIIB), and as many European countries participated, EU-China relations were also promoted. Amid intensifying trade conflicts between the US and China, the EU and the US agreed in July 2018 to minimize trade friction. Since then, they have cooperated in controlling China in the trade sector. The rise of the Trump administration deteriorated its relations with European states, which led a sharp decrease in supporting President Trump, and European perceptions of the US have changed negatively. The Atlantic alliance was eventually exacerbated. The Biden Administration received the task of recovering the broken Atlantic relations caused by the Trump administration. European perceptions of the US have significantly improved in this respect. During the terms of Trump administration, the negative perceptions about the US were predominant—weakening the US hegemony by viewing China as a leader rather than the US. However, after the Biden’s inauguration, the perception survey results showed that the positive perceptions about the US had increased again, and the US was viewed as a significant partner. The survey respondents recognized the limitation of the US political system and democracy model, so Europe’s perspectives on the US seemed to be changed from the past.The 1975 establishment of EU-China diplomatic relations laid the foundation of trade and economic cooperation, environmental dialogue, bilateral summits and human rights talks. Despite each European state showing different attitudes toward China, the two sides maintained relatively sound relations until the end of the 2000s. However, after experiencing the European sovereign debt crisis around 2010, Europeans started to perceive the importance of revising their approaches or policy instruments toward China. In particular, the COVID-19 crisis and US-China conflicts were the leading causes of changing European perceptions of China. The EU declared China not only as a strategic partner but also as a systemic rival. While requiring economic and investment cooperation with China, the EU are cautious about China’s extreme expansionism, human rights violation and challenges to the liberal democracy. It also emphasizes the importance of strategic responses in a multifaceted relationship.Europe-China relations have undergone the biggest changes in the economic sector. Since the rapid growth of Chinese economy, the EU-China trade volume has significantly increased. As a result, the two parties became their number one trading partners. In this process, the EU’s trade deficit with China increased over 180 billion Euros in 2020. Until the mid-2000s, European businesses mainly invested in China.In contrast, Chinese businesses began to increase their investment toward Europe after the 2008 global financial crisis. In 2017, China’s investment in the EU exceeded the volume of the EU’s investment in China. Recently, China’s investment in the EU is usually implemented as formats of mergers and acquisitions (M&A) in the key industry. It has been a direct cause of the EU’s introduction of a screening system for foreign investment and urging China to sign a bilateral investment agreement.European public perceptions of China have negatively changed. European respondents showed their negative perceptions toward China except for the EU-China trade. However, the younger generation relatively showed more positive attitudes toward China than the older generation, which implies further changes. Currently, EU-China relations have changed into a high-tension status. It is still questionable whether the EU maintain their antipathy toward China in the case of the EU’s future enlargement.Traditionally, the EU’s diplomacy is characterized by multilateralism, promoting active cooperation among multiple actors. It contrasts significantly from the US’ unilateral diplomatic approach. Hence, the EU has shown its leadership in the fields where multilateralism is universally applicable, such as environment, human rights and climate change. However, in recent years, the EU has been strengthening its own capabilities by ‘strengthening strategic autonomy’. Also, the EU has recently been trying to benefit from diplomacy, national defense, industry, and technology.Furthermore, the EU attempts to weigh up its Atlantic partnership with the US against its economic partnership with China. US-China conflict would not be easily resolved under the Biden Administration. On the one hand, the US tried to restore its broken trans-Atlantic alliance. On the other hand, the US established an AUKUS—an alternative alliance with Australia and the UK—which could be regarded as a warning sign. Accordingly, the EU shows its selective cooperation with the US rather than the Union’s complete reliance against the US. Against China, the EU attempted to take a multifaceted approach to each issue. It means the EU’s active support in the areas of trade and investment and the EU’s apparent confrontation against China in the areas of illegal subsidies and unfair practices.International conflicts continue to emerge due to a recent combination between security and the economy. The EU’s ‘open strategic autonomy’ is a byproduct of high coordination and troubles in this process. Europe’s strategy for dealing with the US and China provides implications for Korea’s diplomatic and trade policies. South Korea’s diplomacy is at the crossroads due to the US-China conflict triggered by the Trump administration period. It is because South Korea cannot abandon only its value-based alliance with the US but also its significant geopolitical and economic interests with China. First of all, in diplomacy, South Korea-US relations need to be rooted in their alliance because they have shared common values such as liberal democracy and a market economy system. Simultaneously, it is necessary to find an equilibrium between value and pragmatism through establishing multifaceted relations. South Korea does not share its political values and systems with China, but it is obviously an important partner in terms of its economy, climate change, and geopolitical weight. South Korea needs to advocate norm-based international relations by the active participation of the multilateral international order, taking the leading role by finding out the relevant issues and strengthening its solidarity with like-minded partners.In the field of trade, it is essential to note the competition paradigm has been shifting into a form combining technical advances, trade policy, labor and environmental regulations. In particular, international actors are inclined to combine trade policies with social issues like climate change, labor and human rights for restraining China. Therefore, South Korea needs to implement preemptive improvement of the systems up to the level of advanced countries in these fields. It also needs to implement diverse approaches such as traditional trade policies based on the FTAs, public diplomacy based on democracy and human rights, and CSR activities which are under company units. Additionally, it is necessary to actively respond to the changes in the global supply chain by participating in the chain reorganization supported by the US and the EU or the restoration plan by using bilateral economic cooperation and local corporations of Korean companies. -
Challenges of Climate Change Adaptation in Central America and Policy Implications for Korea-Central America Cooperation
Guatemala, El Salvador, Honduras, and Nicaragua – all located in Central America – have been under the direct influence of climate change due to their geographical characteristics. In these countries, climatic factors..
Seungho Lee et al. Date 2021.12.30
Economic relations, Economic cooperation Latin AmericaDownloadContentSummaryGuatemala, El Salvador, Honduras, and Nicaragua – all located in Central America – have been under the direct influence of climate change due to their geographical characteristics. In these countries, climatic factors including temperature and precipitation patterns have been changing, and extreme weather events such as storms have been frequent. Such climate extremes not only cause massive casualties, but also adversely affect a wide range of sectors, including agriculture, water resources, infrastructure, housing, health and migration, dramatically hindering the sustainable development of these countries.As the effects of climate change intensify, there is a growing consensus on the importance of climate change adaptation. In response, the four Central American countries have formulated various policies in order to reduce their climate change vulnerabilities, both at the regional level, mainly through the Sistema de la Integración Centroamericana (SICA), and at the national level. Unfortunately, they have had difficulties in implementing adaptation-oriented policies, given their limited human, financial and institutional capabilities, stemming from complex socioeconomic factors such as the level of economic development, poverty, agricultural dependence, population density, the level of education, and governance.The “caravans,” which have received much attention from the international community in recent years, are a symbol of the failure by the four Central American countries to reduce the adverse effects of climate change. Many of these “caravans” leave their homes in Guatemala, El Salvador, Honduras, and Nicaragua and head to the United States, as socioeconomic conditions deteriorate rapidly in their countries of origin due to climate change. The overall socioeconomic landscape in these countries has further worsened since the COVID-19 outbreak, tarnishing prospects for climate change adaptation. In addition, in 2020, Hurricane Etta and Yota occurred one after another, causing millions of victims and damaging various sectors such as agriculture and infrastructure.One should note that, while Central American countries record relatively low greenhouse gas emissions, they have been under direct, continuous influence of climate change. This suggests that more emphasis should be put on adaptation efforts than on mitigation efforts in promoting sustainable development in these countries. All in all, adaptation activities should be considered as a key to the sustainable development of these countries and there is certainly an international consensus on the urgency of adaptation-oriented activities. Despite such urgency, it is hard to deny that Korea has had difficulties in formulating effective cooperation measures targeting climate change adaptation in Central America, given the lack of understanding of adaptation issues and demands for cooperation in the region. Against this backdrop, this study identifies promising cooperation areas in the field of climate change adaptation between Korea and Central American countries and proposes cooperation schemes in each area. The contents of the study are as follows.Chapter 2 first examines how climatic factors have evolved in the four Central American countries. We also explore how frequent climate-induced weather extremes have been and how much damage they have caused in these countries. We find that, from 1931 to 2020, the average annual temperature and average annual maximum temperature rose, while the average annual precipitation decreased. During rainy seasons, the number of rainy days decreased and the intensity of heavy rain increased. Due to the changes in climatic factors, the frequency of floods, storms, droughts, landslides, and abnormal temperatures in these countries over the 1991–2020 period increased substantially compared to the 1961–1990 period. It is also found that more than 37,000 casualties occurred and the number of victims reached 27 million due to climate disasters in the four Central American countries between 1991 and 2020. Economic losses from climate disasters recorded 2.1% of GDP in Nicaragua from 1996 to 2000 and 4.8% of GDP in Honduras from 2016 to 2020. Moreover, around 2.19 million people were internally displaced due to climate disasters over the 2008–2020 period. Meanwhile, it is predicted that the trend of increasing average annual temperature, decreasing annual precipitation, and increasing intensity of heavy rain during rainy seasons will be prolonged.In Chapter 3, we assess the climate change vulnerabilities of the four Central American countries in geographical and socioeconomic dimensions and examine their policy efforts to adapt to climate change at the regional and country level. We find that they demonstrate a high degree of area-specific and country-specific vulnerabilities to climate change in dry corridor areas, rural areas, mountainous areas, coastal areas, and urban areas, due to their own complex reasons. In this context, the four Central American countries for the first time jointly responded to climate change at the regional level through the creation of the Convenio Regional sobre Cambios Climáticos (CRCC) in 1993. In 2011, the Estrategia Regional de Cambios Climáticos (ERCC) was approved at the 37th SICA Summit. It was followed by an action plan to support the strategy and regional policy efforts. This study provides a review of the adaptation-related contents of the ERCC and each country’s policy documents that provide guidance at the highest level on how adaptation activities should be implemented. By doing so, we identify the regional-level and country-level policy directions in the field of climate change adaptation and the priority areas that each country has set for adaptation purposes. While the priority areas for adaptation differ across countries, among the top priority areas commonly identified by four Central American countries are found to be agriculture, water resource management and disaster response and management.Chapter 4 provides a breakdown of climate development finance allocated to the four Central American countries for projects oriented towards adaptation, mitigation and both, by donor countries and multilateral institutions and by targeted sectors. In terms of the absolute amount, we find that the four Central American countries received a significantly smaller amount of financial support from the international community to address climate change challenges than other Latin American countries. Even after taking into account the population size, it is found that they still did not secure enough financial resources to cope with climate change. Between 2010 and 2019, the amount of per capita climate change finance recorded $174 in Nicaragua, $167 in El Salvador, $145 in Honduras, and $72 in Guatemala. Over the same period, the amount of per capita climate change finance oriented towards adaptation-targeted projects was found to be $110 in El Salvador, $62 in Nicaragua, $41 in Honduras, and $37 in Guatemala. We then present a breakdown of financial resources provided by OECD DAC countries and multilateral institutions to each country’s climate change adaptation projects. Among the priority areas of cooperation – namely, agriculture, water resource management and disaster response and management – we find that there is a clear lack of financial support from the international community towards water resource management in Guatemala, water management and disaster response and management in El Salvador, and disaster response and management in Honduras and Nicaragua. Nevertheless, considering the total amount of adaptation-related development finance allocated to the four Central American countries, one can say that financial support from the international community is insufficient to meet their demands for cooperation in all the areas mentioned above.Chapter 5 presents a brief overview of the structure of Korea’s international cooperation schemes regarding climate change response and the main initiatives formulated upon this background. The National Strategy for Green Growth, Five-Year Plan for Green Growth, Mid-Term Strategic Plan for Development Cooperation and Green New Deal ODA Strategy encompass policy guidelines for Korea’s international cooperation in response to climate change. In particular, with the Green New Deal ODA Strategy in place, it is expected that climate change adaptation will constitute one of the core pillars of Korea’s development cooperation in the near future. Against this backdrop, we identify a number of areas where Korea has accumulated know-how in adaptation-related cooperation activities. We find that Korea has accumulated sufficient experience in agriculture and water resource management, having disbursed large amounts of adaptation-oriented development funds to those areas. While Korea has not allocated much of its adaptation-oriented development funds to disaster response and management so far, we suggest that the experience gained from the related projects conducted in Asia and Latin America can be applied to potential cooperation projects in Central America.In the last chapter, we draw upon the analyses in chapters 3, 4, and 5 to reiterate main areas of challenge that the four Central American countries need to address for climate change adaptation. These are agriculture, water resource management and disaster response and management. We then propose cooperation initiatives for each area of challenge by presenting examples of promising activities and reviewing some cases of the projects conducted by Korea or other donors. We also propose some initiatives that capitalize on partnership with Costa Rica, the United States and Central American Bank for Economic Integration (CABEI) and social ventures, when carrying out cooperation projects in the four Central American countries.The 16th General Assembly of the United Nations Convention on Climate Change (COP16) held in 2010 saw the establishment of the Cancun Adaptation Framework. This signified that adaptation activities aimed at reducing climate change vulnerabilities and increasing resilience to climate change had emerged as a new pillar of climate change response goals. In the Paris Agreement, which has acted as a basis of the new climate framework involving all countries since 2020, climate change adaptation is set as one of the principal goals of the agreement along with curbing temperature rises. The agreement emphasizes the importance of international support for efforts aimed at adapting to climate change and reducing the risk of loss and damage in the developing countries that are vulnerable to climate change. Meanwhile, at the 26th General Assembly of Parties (COP26) to the UN Climate Change Convention held in 2021, developing countries urged cooperation from developed countries to help them to secure financial resources for adaptation, strengthen their adaptive capabilities, and facilitate technology transfers related to climate change.In this context, the four Central American countries have been participating in various climate change negotiations through the channels of the SICA and Asociación Independiente de Latinoamérica y el Caribe (AILAC), demanding enhanced international support for climate change adaptation. Our analysis results emphasize the urgency of cooperation in climate change adaptation in Central American countries and show that Korea has sufficient development cooperation capabilities in their priority areas for cooperation. Accordingly, we propose that Korea expands financial resources oriented towards climate change adaptation in Central American countries and carries out adaptation-related projects in a more active manner through various cooperation mechanisms. Such efforts are expected to contribute to addressing Central American countries’ development challenges and thereby elevate the level of Korea-Central America cooperation. At the same time, they can help to fortify Korea’s leadership in climate change on the international stage. -
Digital Trade Policy in the Era of Digital Transformation
This study focused on digital trade policies that affect the trading of goods and services over the internet. After examining digital trade and digital trade barriers, changes of global digital trade norms, and Korea’..
Kyu Yub Lee et al. Date 2021.12.30
Trade policy, Electronic commerceDownloadContentSummary정책연구브리핑This study focused on digital trade policies that affect the trading of goods and services over the internet. After examining digital trade and digital trade barriers, changes of global digital trade norms, and Korea’s digital trade policy response, the study presented major tasks of Korea’s digital trade policy and mid- to long-term policy direction.The scale of goods imported and exported by Korea through the internet in 2020 was about KRW 6 trillion and 4.1 trillion, respectively. It is difficult to find statistics on Korea’s service exports through the internet. In this study, we estimated the size of Korea’s service exports through the internet in 2018 and 2019 by combining data on electronic intangible goods import/export confirmation document from the Korea International Trade Association and data on value-added declaration from the National Tax Service. First, Korea’s service exports through the internet exceeded at least KRW 3 trillion in both 2018 and 2019. Second, in 2019, the volume of service exports through the internet increased by about 6.89% from the previous year. Third, the scale of export of services through the internet (except for the duty-free shop performance) was larger than that of goods. To estimate the sales effect of domestic e-commerce firms, we matched survey data by KIEP and Korean Enterprise Data and applied the Difference-in-Difference estimation using the propensity score matching technique. In the year of first entry into the e-commerce market, it was estimated that the per capita sales growth rate of e-commerce firms was about 9.5% higher than that of general domestic firms included in the control group. We also conducted a survey titled with Status of Digital Trade Barriers and Difficulties from January to June 2021. As a result of analyzing the randomized data (number of firms: 1,029), we identified that common difficulties of firms were from e-commerce facilitation, digital products, and data regulation, and the difficulties caused digital trade barriers were more burdensome to smaller size of firms.As digital trade has expanded and digital trade barriers have also increased, the WTO e-commerce talk has begun since May 2019. We investigated the heterogeneity of domestic laws related to e-commerce among countries participating in negotiations, differences in terms and areas of interest, data-related provisions guaranteeing free data flows and prohibition of data localization, and customs duties moratorium for electronic transmission. It was predicted that conflicts arising from data-related issues and China’s strong digital protectionism will become major obstacles to the progress of the WTO e-commerce negotiations. To derive the characteristics of digital trade norms that have appeared in bilateral and regional FTAs, we used the TAPED (Trade Agreement Provisions on Electronic Commerce and Data) and reviewed 113 trade agreements that have e-commerce provisions or chapters. First, most of the trade agreements containing digital trade provisions or chapters were signed between continents and between developed and developing countries. Second, trade agreements that include data-related provisions tied to strong obligations have increased. Third, trade agreements that either mandate the application of dispute resolution or allow general exception have been on the rise. We further compared and reviewed the digital trade rules of FTAs signed by the US, EU, and China and also summarized the contents of digital trade agreements signed recently.Next, we examined the Korea’s digital policy in response to changes in the global digital trade environment. The main tasks were to compare directions, strategies, detailed agendas contained in several digital economy policies and digital trade policies over the last four years (2018-21). In particular, we looked into the linkage among digital economy policies including the Digital New Deal and digital trade policy and the implementation structure of digital trade policy. To examine the aspects of data regulation response, we reviewed the recent changes in domestic data regulations. First, we focused on whether commercial research can be included in ‘subjects that are the basis for determining the possibility of personal identification’ and ‘scientific research’ in the Personal Information Protection Act amended in 2020 and summarized related provisions and ongoing issues. Second, we focused on the scope of information that can be used in the MyData project, the security issue of the MyData project, issues related to the adequacy of the EU Commission in relation to the Credit Information Use and Protection Act. We also reviewed recently proposed policies including the Act on the Consumer Protection in Electronic Commerce, Data Basic Act, and Korea Data 119 Project. Using the National Trade Estimate on Foreign Trade Barriers published by the U.S. Trade Representative, we scrutinized the U.S.’s critical views on Korea’s digital trade policy by classifying free data flows, data localization, and other issues and examining them from the perspective of international trade law.Finally, we evaluated Korea’s digital trade environment by using the Digital Trade Restriction Index of the European Centre of International Political Economy, the Digital Services Trade Restrictiveness Index of the OECD, and the Global Cloud Computing Index of the Software Alliance in the U.S. In short, the level of Korea’s digital trade environment was evaluated to be in the mid-range. We recommended that Korea’s mid-to-long-term digital trade policy should aim to be open and rule-based, meaning that it should raise the level of liberalization and embrace global digital trade norms to expand digital trade by introducing minimum number of domestic data regulations. Digital trade policy aiming to be more open and rule-based can be used as a means of achieving the long-term goal of the Korean economy and can yield beneficial effects to consumers, firms, and the long-run growth. Finally, the study provided several policy recommendations of digital trade based on self-evaluation criteria for Korea’s digital trade policy. -
Trade–Distorting Subsidies of the U.S. and the EU: What Can We Learn?
The Uruguay Round’s Agreement on Agriculture (AoA) categorized “domestic support” according to its presumed effect on trade. Subsidies that were deemed to be “trade distorting” were subject to limits specified in..
Jin Kyo Suh Date 2021.12.30
Multilateral negotiations, Trade policy United States of America EuropeDownloadContentSummaryThe Uruguay Round’s Agreement on Agriculture (AoA) categorized “domestic support” according to its presumed effect on trade. Subsidies that were deemed to be “trade distorting” were subject to limits specified in member schedules. Domestic agricultural policies have been radically reformed in a number of countries, including the U.S. and the EU (European Union). This reform has been in the direction of reducing reliance on price supports in favor of direct payments.Both the U.S. and the EU have found ways to adjust policy instruments to appear to show trade-distorting support reduction even when incentives to producers are maintained. In fact, both countries had significantly reduced their trade-distorting supports (TDS) from the initial stage of agricultural subsidies reduction. For example, the TDS of EU decreased to 10.4 billion Euro in 2012 from 73.4 billion Euro in 1995, which is almost 86 percent reduction. Similarly, the TDS of the U.S. shows the continuous declining trend during the period of 1999~2008, $ 24.3 billion in 1999 to $8.5 billion in 2007.However, there was a sharp reversal in this decreasing trends of the trade-distorting agricultural subsidies during the period of 2010~2019. Both economies started to increase, at least maintain their TDS level from around 2008~2010. As a result, EU’s TDS increased in recent years from 11.0 billion Euro in 2010 to 11.8 billion Euro in 2018. Particularly, the TDS of the U.S. significantly was increased by 2.2 times, from $ 15.6 billion 2008 to $ 34.6 billion in 2019. What happened in both economies during the last decade?A close look to 25 years-historical data of agricultural subsidies in both countries shows very interesting aspects in terms of the reduction behavior of agricultural subsidies for the United States and the EU. Both countries would not reduce their TDS on certain agricultural products, which are regarded as ‘very sensitive’ goods in the viewpoint of their domestic politics: wheat, cotton, bananas, and grapes for wine in the EU and soybean, corns, cotton in the United States.It is also interesting that those sensitive products generally have a wide and huge harvested area in both economies. Wheat accounts for 45 percent of total grain production in the EU. Similarly, corn also account for 40 percent of total harvested area of grains in the United States. Thus, we can think about the possibility of connections between those sensitive products and rural society or rural communities that wheat or corn is mainly produced. In other words, the TDS for such sensitive products could be related to the non-trade concerns or non-economic role of agricultural production, which the AoA has already admitted the importance of it. For example, agricultural production can be a necessary condition in the rural development policy. Even if farm household income is guaranteed, if a certain amount of agricultural production is not achieved, living conditions in rural society will deteriorate unless the area is fully urbanized. It can be, therefore, said that it is necessary to maintain a certain agricultural production in the relevant area due to the introduction of sustainable rural and environmental policies along with agricultural subsidy policy.If this is true, then this finding has very meaningful implications on the reform of world agriculture as well as WTO agricultural negotiations, including future directions for agricultural subsidy policies of Korea. First, until now, prevailing view has been that the TDS such as price supports or deficiency payments should be reduced because they distort agricultural trade. However, from the subsidy policy experience of both the U.S. and the EU during the last two decades, we can infer that the certain TDS for sensitive products such as wheat in the EU or corn in the U.S., may be deeply related to the maintenance and development of rural communities from. This conjecture raises the question of whether certain flexibility should be allowed in some cases, rather than viewed as a bad subsidy that must be reduced unconditionally. That is, it is necessary to take a flexible view that some degree of flexibility can be granted in some subsides, even though they are related to agricultural production. At the same time, we need to have a question that the various non-economic roles of agricultural production have not been adequately addressed. In this respects, it is necessary to change the existing perspective on the TDS related to agricultural production, especially the TDS related to maintenance and sustainable development of rural area.Second, if there is a change in the existing uniform view of production-related subsidies, this may affect the current WTO agricultural subsidy discussion. It can be a step-stone to discuss how such TDS can be subject to the green box that is exempt to reduction commitments.Third, we can utilize our finding as a good leverage in the bilateral negotiations with the EU or the U.S. For example, we easily expect that the U.S. is primarily interested in exports of soybeans and corn, and also will have a deep interest on protecting cotton and sugar. Therefore, we can think of a strategy to protect our sensitive products by appropriately satisfying the U.S.‘ request for the item of interest or by requesting ambitious market opening for cotton or sugar.Finally, Korea's agricultural subsidy policy is expected to change from the TDS to a permissible green box subsidy policy. It is true that such a policy centered on green box subsidies is desirable in that it is market-friendly and has high transparency. However, as we saw at the subsidy reduction of the US and EU, it is necessary to properly utilize subsidy policies directly linked to agricultural production or prices, if necessary in the transition to green box subsidies from the TDS. The view that production-related subsidies are a problem is from the point of view of economic efficiency, and some TDS may be positive enough from the perspective of a non-trade concerns of agriculture.
공공저작물 자유이용허락 표시기준 (공공누리, KOGL) 제4유형
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