An estimated total of 5-7 trillion USD will be needed annually for developing countries to achieve the Sustainable Development Goals (SDGs) by 2030. However, financial flows to developing countries currently account for only 400 billion USD per year, thus highlighting the need to expand financial resources. Although public development finance should be increased in order to achieve the SDGs and the 0.7% ODA/GNI target set by DAC member countries, the prospect of increasing the total volume of ODA looks dim when considering the mounting constraints placed on the donor government’s budget. Therefore, the role of private finance will likely become more important to support the economic growth and sustainable development of developing countries.
   This research aims to derive policy implications to increase financial flows to developing countries by examining current international debates on financing for development, conducting a statistical analysis of official development finance including ODA and other official flows (OOF), and analyzing case studies which cover the development finance landscape from the perspective of partner countries. Firstly, the study examines the major issues regarding development finance based on a study of international dialogue on financing for development. Secondly, the study derives the characteristics of official development resources and determinants of resource allocation by type based on statistical analysis of official development finance. This is followed by a study of cases in the Philippines and Senegal to understand the issues on development finance from the perspective of partner countries.
   This research captures the characteristics of major donors, sectors, and income level of partner countries by type of development resources, and derives the determinants of resource allocation by analyzing ODA (grants, concessional loans, equity investment) and OOF statistics for the past five years. The study specifically focuses on identifying aspects of OOF that set it apart from ODA, as a category of flows that do not satisfy the concessionality criteria and grant elements of ODA or are used for commercial purposes. OOF tends to represent a larger share than ODA in the case of middle-income countries. While ODA accounts for 31% of funds provided to lower income countries, OOF accounts for only 2%. ODA and OOF also differ in the sectors they are focused on, with more than one-third of ODA concentrated in social infrastructure and services while OOF is mainly focused in economic infrastructure (one-third of OOF) and production sectors (39 %). In order to analyze the determinants of ODA and OOF allocation, the study establishes a model that includes the size of the country, income level, FDI, openness, business environment as explanatory variables and conducts empirical analysis. The results show that the coefficients and statistical significance are different according to the estimation method. While the objective of the empirical analysis is to derive differences in the allocation determinants for two different official resources by their distinctive characteristics, the estimates of the OOF model were not statistically significant. It indicates that allocation of OOF is determined not by the characteristics of the partner country but by the commercial aspects of the projects.
   One of the main distinguishing features of the research is how it handles development finance issues from the perspective of the partner country. We selected the Philippines and Senegal for our case study, where we analyzed the financial needs and recent trends of inflows in the area of development finance. Our study also identifies differences in the perspectives and responses of partner countries regarding private funding, based on a review of available literature and field surveys. The focus of the study was to derive challenges to mobilize private finance and understand the role that official development finance plays toward attracting private finance to support its growth, and finally to clarify the role of ODA throughout changes in the development finance landscape.
   The results of the case study show a general decrease in ODA and increase in private finance in Senegal and the Philippines, taking into account some differences in the composition of development finance and trends in inflows of diverse development finance resources. The research confirms that both countries have expectations on TOSSD as a statistical methodology to track, adjust and manage the diversified external financial inflows. Furthermore, both countries shared a lack of sufficient data on the participation of private finance in infrastructure projects through public-private partnership mechanisms, as well as a lack of capacity to monitor and manage the projects. One perspective to be highlighted was that the financial inflows from emerging donors such as China and Islamic financial institutions should be included in TOSSD. As the role of non-traditional development actors has been expanded, ODA could play a significant role in the newly emerging challenges such as coordination between development objective and commercial objective, the capacity building of the partner country's government and local private sector, debt management, transparency and results management, and risk management.
   The Korean government plans to expand the size of its ODA to 0.2% of its GNI by 2020 and, in particular, has announced the policy direction of expanding the size of financial resources by mobilizing private finance through development finance instruments. While the legal instruments necessary to utilize development finance instruments have been established by the revision of the Economic Development Cooperation Fund Act and its enforcement decree in 2016, this has not led to the active identification of development projects that utilize diverse financial instruments to leverage private finance other than ODA. However, as the international society is yet to reach an agreement on the principles of these development finance instruments, it would be a practical approach for the Korean government to actively participate in the international dialogue and ongoing process of establishing standards and implementing principles, after which they can be introduced into national policies.
   First, the capacity to utilize blended finance schemes must be strengthened. Blended finance incorporates a diverse range of stakeholders such as donor countries, donor agencies, partner countries, and private sector participants meaning that Korea must have the capacity to coordinate the diverse needs of these stakeholders. In addition, the Korean government must acquire technical and legal expertise, knowhow learned in the long-term as well as networks and partnerships established in the field if it is to take advantage of diversified financial instruments properly. Also required will be the capacity to evaluate whether these financial instruments are being properly utilized. To this end, Korea should improve its capacities and visibility in the international society, as well as strengthen partnerships through participation in large-scale blended finance facilities. Ultimately, Korea should provide sustained support for sectors which could establish business environments at partner countries that can attract private finance, rather than merely conducting one-time technical assistance projects.
   Second, Korea should diversify its strategy and approach to support partner countries by their income level. In order to implement SDGs in developing countries, Korea should maximize development results by combining ODA, OOF and private finance. To this end, however, Korea should establish and operate development finance strategies that take into consideration the diverse and distinct environments at each partner country, such as their level of economic development, income level, capacity of the government and private sector, political, economic and social environments, policy on private investment, and institutional framework. Many middle-income countries show a high dependence on domestic funding or remittances for its development. Therefore, in these cases it is more important to expand assistance on tax policy, institutional reform on tax, and tax administration while supporting these partners to construct a mechanism that can fully take advantage of domestic financial resources or remittances as development finance. However, in the case of lower-income countries, lack of capacity is the main challenge and thus it becomes more important to assist them to strengthen the capacity of their human resources and institutions to utilize private finance.
   Third, Korea should revise and update its Country Partnership Strategy (CPS) to incorporate the results of international dialogue on finance for sustainable development and the necessity to diversify the utilization of development finance according to each country's capacity level and environment. Based on a thorough analysis of the changes in development needs and trends in inflows of external development financial resources, Korea should establish directions to combine ODA with diverse financial resources such as non-concessional loans and private funds. The 3rd CPS, which will be introduced in 2020, should function as a partnership strategy to link and combine private finance and various public development resources beyond ODA, which will be included in TOSSD.
   Lastly, when considering the potential risks that the utilization of private funds may accompany, it will be necessary to establish an ex-ante and ex-post risk management framework. Even in cases where the private sector engages in development projects, it is important to ensure development objectives are met and development effectiveness remains a priority. Another essential consideration is to apply existing principles of aid effectiveness, such as alignment with partner countries’ systems and participation by the local community. In particular, Korea should establish a participation mechanism which incorporates demands and opinions from the local government and community, together with a system to weigh local stakeholders’ interests and priorities. Furthermore, a results management framework to monitor and evaluate ongoing processes should be constructed to review the effectiveness of development projects. 

   Following the global financial crisis in 2008, various forms of financial instability have continued to emerge due to the European fiscal crisis, US taper tantrum, plunge in resource prices, and worries about a hard landing in the Chinese economy. This financial stress is likely to continue on the domestic and international fronts when considering the deepening US-China trade war, sustained US interest rate hikes, and economic unrest in China and emerging economies. Upon this backdrop, this study develops a financial stress index which can measure financial instability, and analyzes changes in determinants of financial instability in Korea and emerging economies, as well as the influence of various external shocks on Korean financial stress.
   In Chapter 2, we introduce the KIEP Financial Stress Index, an instrument we have developed to measure the level of financial instability in a systematic and continuous manner, and evaluate recent levels of financial stress in Korea and emerging economies. We have developed two types of our Financial Stress Index (FSI) for the Korean economy, one based on financial indicators and the other on big data. The FSI based on financial indicators is calculated in a way that can measure financial stress properly but is not complicated in its measuring method, thus allowing for high usability. The index is compiled from a variety of data sources including stocks, foreign exchange, and the money market. Next, we construct an FSI using the machine learning method based on the data of daily search word frequency provided by Google Trends. Although big data has a short time series of available data, it can be utilized as a supplementary index of the FSI based on financial indicators because of the rapidity and timeliness of big data information. Recently, Korea’s FSI has fallen below the long-term average, which is the threshold of financial instability. However, the FSI rose slightly from 2.9 in December 2017 to 8.0 in October 2018 due to the recent US interest rate hikes, deepening US-China trade disputes, and China’s economic unrest. By sector, the foreign exchange market and the stock market are more unstable than the money market. Among emerging economies, the FSIs of Turkey, China, Mexico, and Russia have recently risen sharply, largely due to unease in the foreign exchange market.
   In Chapter 3, panel analysis and time series analysis are conducted to investigate changes in determinants of financial stress before and after the global financial crisis. First, we examine the changes in determinants of financial instability in emerging countries after the global financial crisis, using the FSI of individual emerging economies calculated in Chapter 2, through a fixed effect panel analysis. Our results show that the effects of foreign portfolio investment on the FSI after the global financial crisis increased compared to the pre-crisis period, while the effects of other investment (e.g. loans) decreased. In the case of foreign portfolio investment, the effect of equity securities on financial stress is greater than that of debt securities. This can be because global funds flowed from other investment to portfolio investment after the global financial crisis. In the case of other variables, the effects of the current account balance, the fiscal balance, and the global commodity price index on the FSI after the financial crisis expanded compared to the pre-crisis period. The results of an analysis of dynamic changes in determinants of financial stress in Korea using the recursive least squares method indicate that the effect of foreign portfolio investment and other investment on financial instability generally expanded after the financial crisis. The impacts of these factors greatly increased right after the global financial crisis, and after then high levels of impact have continued. Among foreign investments, the influence of foreign debt securities of portfolio investment on financial stress has expanded the most. In addition, the effects of unrest in the Chinese stock market on the Korean FSI changed from negative (-) to positive (+) immediately after the financial crisis, and a positive relationship has continued until recently. This shows that the China factor emerged as one of the major determinants of financial instability in Korea since the global financial crisis.
   In Chapter 4, we use a structural VAR model to analyze the impact of various external shocks such as US interest rate hikes, China’s financial market instability, and global trade uncertainty on Korea’s FSI. Empirical results show that the impact of the US interest rate rise changes from before and after the global financial crisis. Before the financial crisis a hike in the US interest rate has the effect of lowering domestic financial instability, but following the financial crisis a hike in US interest rates raises domestic financial stress. This is because the response to the rate hikes before and after the financial crisis was different. Prior to the global financial crisis, US interest rate hikes did not provoke capital outflow concerns in emerging economies and Korea due to  strong economic growth in these countries. On the other hand, since the financial crisis, US interest rate hikes have tended to lead to concerns over capital outflows as emerging economies and the Korean economy remain sluggish. China’s financial instability has been shown to have a rapid and significant impact on Korea’s financial stress, confirming that the Chinese financial market is one of the major determinants of domestic financial instability. Finally, global trade uncertainty does not have a significant impact on Korean financial anxiety, and Korea’s FSI does not respond to global trade uncertainty shocks. This could be explained by the fact that global trade uncertainty became visible after the launch of the US Trump administration in 2016, which was not fully included in the data used in the empirical analysis.
   In Chapter 5, based on the results of our research, we suggest policy implications to strengthen financial stress management. First, the KIEP FSI developed in this study can be used as a tool for Korean policy authorities to monitor and respond to domestic and external financial instability. The KIEP FSI is divided into stages of financial instability (e.g. stable, unstable, and crisis) and can be used in connection with the authorities’ manual for financial stability at each stage.
   Next, the variables to be considered when monitoring the risk of financial instability in Korea and emerging economies are foreign portfolio investment, other investment, current account and fiscal balance, and world commodity price index. In particular, monitoring of foreign portfolio investment should be strengthened. Another suggestion is for Korean policy authorities to work toward stabilizing excessive foreign capital flows and maintaining the current account surplus and fiscal soundness in order to stabilize the financial market.
   Finally, the current financial stability system should be reviewed from a larger perspective. This is because global capital flows have changed after the financial crisis, from other investment to portfolio investment, and the influence of portfolio investment on financial stress has become larger than that of other investment among the factors causing financial instability. However the existing financial stability system, which involves measures such as imposing limits on forward position, bank levy and foreign currency liquidity coverage ratio, focuses on other investment (i.e. financial institutions such as banks). Therefore, it will be necessary to strengthen the financial stabilization measures for the capital market by closely monitoring the capital flows of foreign portfolio investors and strengthening exchanges with foreign central banks and sovereign wealth funds. 

   The aim of this study is to examine the development and present condition of the African Growth and Opportunity Act (AGOA), to review cases of beneficiary countries that are utilizing AGOA and to analyze the effects of AGOA on African exports to the US. It also seeks to draw implications for Korea’s trade policies on Africa by prospecting US’s trade policies towards Africa in the Post-AGOA era.
   AGOA is a preferential trade agreement of the US that seeks to foster economic growth of and eradicate poverty in Africa by providing duty-free access to US markets for goods made in Africa. It is an agreement specific to Sub-Saharan Africa in addition to the Generalized System of Preferences (GSP) that is applied to developing countries in general. AGOA can be utilized by any African country as long as it satisfies certain criteria on governance, legal issues, human rights, and labor rights. The purpose of such conditions is to expand the principles of a free market economy and democracy as well as to foster economic growth. 
   AGOA was first implemented in 2000 and is expected to expire in 2025. Exports of crude oil in particular increased rapidly in the early years of AGOA but later declined after oil prices fell in 2008. Other items excluding crude oil and gas show a gradual increase in export, especially items from the light manufacturing sector such as textiles and apparel. This is because AGOA exclusively enables lesser developed countries in Africa to export textiles and apparel, which is unprecedented. In some countries, certain areas of the manufacturing sector such as textiles and apparel, or auto assembly are developing at a fast speed because AGOA has widened access to US markets.
   Chapter 2 examines the current status of AGOA, the utilization strategies of key beneficiaries, and also summarizes the outcomes and limitations of AGOA. AGOA is unique in that it is not a mutual trade agreement but is rather implemented in the form of a US trade law. Its beneficiaries are also determined based on a yearly evaluation by the executive branch. In 2018, 40 countries were determined as eligible beneficiary countries. US trade with Sub-Saharan Africa was measured at around $ 39 billion in 2017, which is 1% of the US’s total trade. Approximately 25~65% of imports from Africa receive preferential treatment through AGOA and GSP. Items include crude oil, gas, mineral resources, agricultural products, textiles and apparel, and automobiles. Trade and investment between the US and AGOA beneficiary countries have increased in general, but is limited mostly to the energy sector, mainly crude oil and gas.
   It is important from the African perspective to diversify export items that traditionally were centered on minerals and agricultural goods. The latter part of Chapter 2 outlines the national strategies of Kenya and Botswana, major countries exporting apparel and minerals respectively, in utilizing AGOA to diversify their trading items. The case of Ethiopia, who is trying to foster its manufacturing industry with a special focus on the textiles and apparel sector through AGOA, is also reviewed.
   Meanwhile, there are also many limitations to and criticisms of AGOA. First, there are institutional limitations arising from the fact that AGOA is a domestic legislation of the US and thus, the dispute resolution process is different from that of general trade agreements. The annual review of eligible countries also increases the uncertainty of the policy. Furthermore, the impact of lowering tariffs can only be limited if Africa's export capacity is not strengthened. Infrastructural development and widening the scope and size of Africa's exports need to be supported simultaneously. The latest revision of AGOA requires beneficiary countries to hold routine discussions with the US and includes measures to strengthen Africa's trade competence to overcome these challenges. African countries are diverging in their efforts to utilize AGOA as some countries take active measures to maximize opportunities arising from AGOA by providing implementation strategies and evaluation, while others are disqualified due to their lack of conformity with the AGOA regulations. This chapter also examines challenges to the development of long-term investment or trade because of the uncertainty of AGOA’s continuity and because its impact on the development of the manufacturing and agricultural sectors remain limited, unlike the case of crude oil.
   Chapter 3 analyzes the impact of AGOA on the variation of trade between the US and Sub-Saharan African countries. Based on a time series analysis only, trade in the early years of AGOA did in fact increase but also rapidly decreased after 2008. To identify the trade effects of AGOA one needs to control certain external conditions such as changes in the global economic structure and changes in Africa’s trade conditions during the same period as the operation of AGOA. Identifying the impacts of policy changes arising from the key revisions of AGOA is also important in assessing the effects of AGOA. This research utilizes the analytical methodology used by Frazer and Van Biesebroeck (2010), a representative study on the effects of AGOA, in examining the trade effects of AGOA over 16 years until 2017. The HS Code, which classifies trade data, modifies its upper 6-digit universal code through international consent every 5 years. The 10-digit code, the standard code used for tariffs and customs, can also be adjusted throughout the year reflecting changes in the US trade regulations. As a result, codes within trade data show discontinuity when using them for mid to long term time series analyses. To correct the errors arising from this problem, the analytical method of Pierce and Schott (2012) is used for the reclassification of goods over the entire time series in the trade impact analysis in Chapter 3. Results of the analysis show an overall increase of trade through AGOA but its effects vary according to the time and industry significantly. In particular, because a group of countries can export apparel duty-free as a result of AGOA’s uniqueness, certain differences were noted between different groups of countries in addition to the items of goods.
   Lastly, chapter 4 provides prospects on possible changes in the US trade policy towards Africa and draws implications for the Korean government’s trade policies towards Africa based on the review of the status of AGOA, cases of application, and its trade effects in the previous chapters. It is difficult to directly apply the policies of the US towards Africa not only because it is one of the leading countries in the international development and cooperation area, but also because the US provides preferential treatment to African countries through AGOA in addition to the GSP treatment. However, it is necessary to review AGOA in establishing Korea’s trade strategy for Africa because it is the representative trade policy on Africa.
   Since 2000, Africa is showing rapid economic growth with Ethiopia, Ghana and other eastern and western countries at its core. In March 2018, the African Continental Free Trade Area (AfCFTA), the largest trade bloc worldwide was established and is changing the trade environment of Africa at a fast pace. Consequently, emerging countries such as China, India, and Turkey, as well as traditional partners of Africa such as the US, Europe and Japan are reexamining their partnership strategies with Africa through which they are seeking to expand trade and investment networks. Korea also needs to draw out a plan on how to design its trade partnership with Africa, the next consumer market of this era, in addition to its development cooperation policies.
   An economic cooperation strategy that can be agreed by both Korea and its African partners is one that blends and balances trade issues with development agendas. In this sense, AGOA provides meaningful implications to Korea despite the differences in size and quality between the economic cooperation policies of Korea and the US towards Africa. It is not easy for Korea to adopt trade strategies such as the GSP or AGOA that can be applied to an entire group of developing countries or the entire African continent, considering Korea’s capability. The results of this research that show the varying degrees of AGOA’s impact based on the country, region, and industry provide several important implications. One suggestion would be to begin by selecting certain strategic trade partner countries or regions as a base for expanding Korea’s trade partnership with Africa, which would be in line with Korea’s capacity restraint. As can be noted in the Post-AGOA discussions, the US is also developing its agendas and strategies towards selecting priority countries with higher probabilities of business cooperation, such as middle-income countries or those who have an industrial base. Such an approach can be of consideration in designing Korea’s strategy.
   Developing a model of a reciprocal bilateral trade agreement with African countries is as important as selecting partners for trade cooperation. Reciprocal bilateral or multilateral free trade agreements pursued by Korea so far have been relatively symmetric is opening markets and also covers the whole range of economic cooperation such as bilateral trade, investment, intellectual property rights, and e-commerce. A symmetrical agreement that requires all parties to open its markets on the same level would be burdensome for African countries, especially as Korea’s consumer market is not as large as that of the US. Like that of the EU, a reciprocal bilateral trade agreement with African countries should open up markets on a medium to long-term time frame by considering the demand and conditions of developing countries. It should also reflect the mutual cooperation between Korea and African countries that is centered on the key areas where Korea can provide support for Africa’s economic development. The legal and institutional issues currently under discussion by the US government and assembly to support US investment in Africa and investment by African companies in the US, to maximize the effects of AGOA can also be adjusted to Korea’s situation.
   It is necessary to expand the framework where the agendas of economic cooperation can be discussed between Korea and the African Union (AU), with regional economic communities (RECs), especially as the importance of Africa is increasing with the launch of the AfCFTA. The AGOA Forum is held every year to strengthen the economic connection between beneficiary countries. Countries share the trade enhancement effects of AGOA, discuss barriers to trade and investment, and seek improvement measures at the forum. It would be meaningful to combine and promote the Korea-Africa Economic Cooperation (KOAFEC) supervised by the Ministry of Strategy and Finance, the Korea-Africa Industrial Cooperation (KOAFIC) supervised by the Ministry of Trade, Industry and Energy, the Korea-Africa Forum held between the Ministry of Foreign Affairs and the AU, and other policy consultative groups into one regular summit-level consultative body like that of Japan’s Tokyo International Conference of Africa’s Development (TICAD) or China’s Forum on China-Africa Cooperation (FOCAC).
   Last of all, the Post-AGOA discussion that was initiated at the 2018 AGOA Forum in consideration of 2025, when AGOA expires, should be noted. The US has made clear that it is shifting its policy direction towards signing reciprocal bilateral trade agreements with African countries. It will take some time for the bilateral free trade agreement mentioned at the AGOA Forum to materialize, but some African countries may competitively engage in negotiation with the US because it is of national interest to maintain preferential access to the US market. The Korean government needs to strengthen the monitoring of future trade agreements between the US and Africa because it is expected to be a higher level of reciprocal bilateral trade agreement that includes investment, service, transparency to actively expand support for US companies willing to invest in production facilities such as infrastructure in Africa, in addition to mutual tariff concessions to expand trade. 

   This report aims at providing a reference for the Korean government’s policies for an income-led growth. Among the policies discussed or implemented for the goal of an income-led growth, it focuses on housing-cost reduction (Chapter 2), employment expansion in the public and social services (Chapter 3) and minimum-wage increase (Chapter 4). Housing cost and employment in the public and social services have been chosen, because the level of awareness and interest on these topics is too low despite their importance. On these topics, the Korean government can learn from Europe, where welfare in general is known be highly developed, as well as from the U.S., where many policies in these areas have been employed to counter economic crises. In particular, this report compares the current state of Korea in these areas to those of Europe and the U.S., and delves into the cases that stand out in that comparison. Regarding minimum wage, which has already been widely discussed, this report does not add more cross-country comparison or case study. Instead, considering the ongoing debates on the impact of minimum-wage increase in Korea, it aims at providing scientific evidence on the impact of minimum-wage increase. For this, it empirically analyzes the impact of minimum-wage increase at the country level using a panel of the OECD countries.
   The main findings of this report are as following. First, for the share of housing rents in disposable income, Korea ranks mid-low compared to European countries and the U.S. At the same time, Korea’s housing subsidies as a proportion to the GDP are also low when compared to the same countries. The U.K. and France have significantly higher subsidies, for significantly more households than Korea. The U.K. has a finer-tuned design of housing policy. The focus of housing policy in the U.S. has shifted from housing development to rent subsidies.
   Secondly, Korea performs badly in terms of the public and social services employment per population, in comparison not only with richer countries than Korea, but also with the eastern European countries with income levels significantly lower than in Korea. Compared to Sweden, Korea has significantly less healthcare practitioners per population, and they are significantly more concentrated in big cities. This implies a wider regional gap in the access to medical services in Korea. In the U.K., the public sector employment has been on a secular decline since the Thatcher government, but the public and social services employment, particularly in healthcare and social works, has been increasing in most of the time. The U.S. expanded the public and social services employment during the 1970s to counter economic crisis. Noticeably, the federal government delegated the operation of such expansion to local governments, while offering the necessary budget and guidelines. The Obama administration also expanded the public and social services employment as an economic stimulus during the Great Recession.
   Regarding minimum wage, this report estimates its impact on employment rates by age group and by industry, profit by industry and income inequality. An unbalanced panel of the OECD countries with mandatory minimum wage is used, and each estimation has a different set of countries and years depending on data availability. Because the proportion of workers directly hit by a minimum-wage increase is likely to depend on the distance between the minimum wage and the median wage, the proportion of the minimum wage to the median wage is taken as the main explanatory variable. A linear model and a quadratic model are estimated.
   The results show, that the impact of minimum-wage increase depends on the relative size of the minimum wage compared to the median wage; that is, the quadratic term is both statistically and economically significant. However, minimum-wage is estimated to reduce income inequality in general. 

   Starting from 2012, the Chinese economy has slowed down to enter the era of “New Normal,” where medium-paced growth is the new norm. This means that the Chinese economy has reached the limits of its quantitative growth driven by investment and exports over the last 30 years, and now needs to transition toward a new growth model. In response, the Chinese government has proposed “Supply-side Structural Reform” (SSSR) as a new economic development strategy in the era of New Normal.
   SSSR signifies a shift away from demand-side quantitative growth toward supply-side qualitative development by upgrading the economy and industry. It means to transform into an innovative economic growth method by raising total factor productivity (TFP) through improvements in the technology level, forsaking the previous economic growth method dependent on large-scale input of labor and capital which the Chinese economy has engaged in for 30 years since its reform and opening. The Chinese government plans to overcome the so-called middle income trap through supply-side reforms and lay the foundations for China to rise as a superpower by 2050. SSSR was proposed by President Xi JinPing of China in November 2015 and the year of 2018 is the third year of its implementation. In this report, we analyze the background and characteristics of China’s SSSR, and examine in detail the issues of cutting industrial overcapacity, deleveraging corporate debts, lowering corporate costs, and promoting new growth engines. Based on the results of the analysis, we evaluate China’s SSSR and draw implications for Korea.
   Chapter 2 analyzes the background, main contents, development process, and characteristics of China's supply side structural reform. This paper examines the background of SSSR in terms of the economic system, macroeconomic policy, production factor, industrial factor and financial risk. We also discuss the characteristics of SSSR in comparison with the Reagan-Thatcher supply policy of the 1980s.
   Chapters 3 to 6 reviewed in detail the current status and policies of each of the key tasks of SSSR pursued by the Chinese government. Chapter 3 analyzed the measures taken by the Chinese government to resolve industrial overcapacity issues, which the Chinese government has put forward as a top priority. First, we compared the concept of overcapacity and analyzed the internal and external causes of overcapacity. The Chinese government has been implementing various overcapacity-related policies since 2009, but these failed to have a big effect. Then, various SSSR measures were proposed in 2016, leading to intense restructuring by the central government and rapid recovery of excess capacity in the steel and coal industries, also elevating the profitability of companies rapidly. During this process of relieving overcapacity, the Chinese government encouraged the reduction of facilities through the integration and consolidation of large state-owned enterprises. Through an analysis of the merger of Baoshan Steel and Wuhan Steel, China's representative steelmakers, we discussed the restructuring process of Chinese traditional industry and the future strategy in detail. Lastly we evaluated the performance and limitations of cutting industrial overcapacity and discussed opportunities and threats to Korea.
   Chapter 4 analyzed the deleveraging of corporate debt, which is considered to be a major risk for the Chinese economy. We discuss the background and status of China’s corporate debt, which has increased at a rapid pace since 2008, by using BIS data. In addition, we analyze Chinese corporate debt by company ownership, industry, and periods, showing that China’s corporate debt has a high proportion of state-owned enterprises, real estate and infrastructure, and long-term bonds. We also analyzed the deleveraging policies by period, the results of which indicate the reduction of corporate debt in 2016－17 had a negative effect on the financing of private companies rather than the reduction of debt at state-owned enterprises. We discussed the shift to “structural corporate deleveraging,” which emphasizes the reduction of state-owned enterprise debt from 2018. The possibility of China's corporate debt developing into a financial risk is discussed through data analysis of China’s credit gap, credit strength, and ICR. We expect that the rate of change will be controlled and corporate debt will remain within a level manageable by the Chinese government, and thus the possibility of a financial crisis occurring or spreading to the real economy is low.
   In Chapter 5, we analyzed measures taken by the Chinese government to lower corporate costs and enhance corporate vitality in the market economy. We analyzed the status of China’s corporate cost by classifying it into financing cost, labor cost, tax, energy and raw material cost, logistics cost, environmental cost, land cost, real estate admission cost and institutional transaction cost. China’s corporate costs are increasing in general terms, and labor costs, social insurance costs, and funding costs are a heavy burden on companies. We also discuss the possibility of environment protection agendas posing a new burden as the Chinese government pursues more eco-friendly policies. By analyzing the transition of business tax to value-added tax (VAT) to reduce the burden of company costs and promote vitality in business activities – thus streamlining administrative procedures, supporting the strategic industry and reducing the social insurance payment rate – we examine the development of the industry and creation of new growth engines through VAT tax reforms by the Chinese government. While the transition of VAT was successful in the development of the service industry, there were also evaluations that the simplification of administrative procedures and the reduction of the social insurance payment rate did not have a great effect. China has carried out large-scale tax cuts since the US-China trade dispute in 2018, and we expect these to be implemented in a direction that supports industrial competitiveness and creates new growth engines in preparation for the 4th industrial revolution era.
   Chapter 6 analyzes the creation of new growth engines, which is the ultimate goal and mid- to long-term goal of SSSR. Through an analysis of innovation-related data such as the global innovation index, global manufacturing competitiveness index, R&D investment amount, and patent applications, we confirmed that China’s industrial and innovation competitiveness is improving. Policies related to the creation of new growth engines have been refined and pursued since before SSSR measures were proposed. We also reviewed China’s Made in China 2025 and Internet Plus agenda, and its innovative start-up ecosystem policy. For each policy, we conducted a case study by selecting industries in which the Chinese government has actively supported and show rapid growth, and in which cooperation or competition are anticipated with Korean industries. Our case studies analyze BYD, an electric vehicle manufacturer, Baidu, which is developing its own autonomous vehicle platform “Apollo,” and DJI, a drone manufacturer, as the new engines of China’s economy.
   In Chapter 7, we perform an overall evaluation of SSSR, the results indicating that China's SSSR is a creative development strategy based on the uniqueness of the Chinese economy, one which is difficult to find in conventional economic theory or macroeconomic policy as a development strategy for sustained and stable growth. This form of government-led total supply management is based on China’s special economic conditions and aims to reconcile the contradictions within the Chinese socialist market economy. However, the key to the success or failure of SSSR measures will be to minimize resistance on the part of local governments and state-owned enterprises and gain their cooperation in the process.
   The policy implications of SSSR on the Korean economy are as follows. First, in order for the Korean economy to take another step beyond its current contradictions at this stage, it will need to balance aggregate demand and aggregate supply. Second, efforts should be made to balance the role played by the government and the market in a harmonious manner throughout the restructuring and strengthening of competitiveness in overcapacity industries.  Finally, in order to prepare for the 4th industrial revolution era, it will be necessary for the government to boldly push forward policies and present its vision through selection and concentration in creating new growth engines. 

   The rapid spread of digital technologies is bringing about a reshaping of the global business landscape, in which the roles of services have been diversified in the global value chain  (GVC). As a matter of fact, the share of global manufacturing goods trade, which stood at 80% of total trade in 2006, fell to 70% in 2013 and remained at 76.8% as of 2017. On the other hand, the share of service trade gradually increased from 19.8% in 2006 to 23.2% in 2017.
   Against this backdrop, we attempt to verify how innovating digital technologies can significantly affect trade costs in services by conducting rigorous empirical experiments. Our empirical investigation may contribute to better understanding about global trade patterns currently in action and allow the designing of more practical policy options to take in the digitalizing global economy.
   In this study, we attempt to examine the case with diverse approaches. First, we introduce digital economy strategies launched by major economies, then review ongoing cooperation agenda discussed in the global community, including the WTO, OECD and APEC, in response to digitalization. Next, we examine how manufacturing and service trade costs have changed in Korea from 2000 to 2014, and trade costs between Korea and its major trading partners. Following this, we analyze the determining factors of service trade costs using the gravity model. Next, we analyzed Korea's service trade patterns, characteristics and its global competitiveness in each service sector.
   One of the initial outcomes we found is that the international competitiveness of Korea’s service trade is very low compared to its manufacturing trade. The empirical evidence clearly suggests the weak international competitiveness in Korea’s service trade field is due to low productivity in its service industry. The share of the service sector in Korea is 70.4%, accounting for a larger portion than the manufacturing sector. However, the value added portion of the service industry is 59.2% (as of 2016), and the increase in labor productivity is only 2.4% of the manufacturing industry.
   Next, we analyze and measure the factors affecting the changes in the service trade cost in the digital economy. In the first phase of the analysis, the bilateral service trade costs for five service industries in 43 countries and in the world between 2000 and 2014 are compared with those of domestic transactions and international transactions introduced in Novy (2013). We used a top-down trade cost estimation method with relative difference. In the second stage, the effect of proliferation of digital technology on the measured bilateral trade cost using the gravity model was quantitatively analyzed.
   Our estimations of trade costs indicated the service trade cost value was about 265% in 2000 and estimated at 231% in 2014. On the other hand, the trade cost measure of the manufacturing industry was 151% in 2000, which is lower than the service industry, and estimated at 128% in 2014. These results quantitatively verify the qualitative evaluation of existing studies that point to high service trade costs as a cause of the relatively low share of trade, even though the service industry produces a relatively high added value as compared to the manufacturing industry. The service industry, which has the highest service trade cost by industry, is a distribution service and the trade cost of transportation service is the lowest. Similar to the service costs of the entire service industry, the service cost of each industry gradually decreases in the period of 2000-2014.
   In the analysis of the determinants of trade costs, we used the International Telecommunication Technology Development Index (ITI) provided by the International Telecommunication Union and the Digital Trade Restriction Index (DTRI) provided by the European Center for International Political Economy (ECIPE). The first variable represents the level of digital technology in each country and is most widely used in measuring the information society. The second variable is used to reflect the regulations that accompany digitization. The results show the service trade cost reduction effect of the ICT development index is significantly higher than the reduction effect of the manufacturing trade cost, is continuously increasing during the past 10 years and proved statistically significant.
   We also analyze that the reduction of service and manufacturing trade costs caused by the advancement of digital technologies will not be stronger than the negative effects of digital trade regulation. Therefore, in order to minimize the effect of the DTRI, which greatly exceeds the trade cost reduction effect of the ICT development index and has high statistical significance, it is necessary to establish international norms for relaxation of regulations and standardization of digital trade restriction factors. In particular, when considering the empirical analysis that it is the most effective to mitigate policies that limit the access to finance and market access in the case of service trade, policies to limit foreign direct investment, intellectual property rights, data policy, content access, standards and online sales and transactions and international efforts for standardization should be mitigated. However, the unconditional easing of regulations restricting digital trade would not be a desirable approach, and appropriate regulation and efficiency improvement through institutional maintenance should be considered together.
   More specifically, examining the policy implications of the results of the empirical analysis, the trade cost of the Korean service industry is considerably higher in the service industries and the productivity of digital technologies in the five service industries is at an advanced level. The factor analysis shows that the growth of service trade in Korea is led by growth in the service industry. However, unlike in the US, the effects of trade diversion to third countries were significant, reflecting the competitiveness of the Korean service industry, especially in developed markets, not yet comparable. In order to develop the service industry in Korea, the above-mentioned digital infrastructure should be developed quantitatively, and institutional improvement and regulation should be prioritized to enhance its competitiveness. In particular, it seems to be more effective to improve financial and market accessibility through support policies such as taxes and subsidies to promote the service industry and improvement in government procurement-related policies.
   As a strategy to enhance Korea’s international competiveness in the service industry, this paper suggests firstly improvement of the digital regulatory environment, second, expansion of international cooperation such as by enhancing FTA networks, and third, improvement of R&D operating mechanisms and human resource development. 

   The purpose of this research is to propose policy implications and recommendations for the government’s New Southern Policy from the perspective of trade issues, thus enabling a more integrated policy that can be linked with Korea's ODA strategy and also strengthen global value chains in ASEAN and India. In order to achieve these research objectives, this report reviewed the recent developments in and characteristics of foreign relations in strategic regions to the south of Korea and compared the ODA strategies for major countries in the new southern regions. In addition, after analyzing the global value chain in new southern regions and empirically studying the relationship between the global value chain and ODA, we present suggestions for ODA policy and concrete policy measures.
   Chapter 2 of this report looked at the overall economic trends of ASEAN and India, focusing on macroeconomic relations, foreign trade and investment, and foreign aid. ASEAN has a population of about 640 million – including Indonesia (250 million), the Philippines (105 million), and Vietnam (94 million people) – and is classified as a region with the third largest population in the world after China and India. In 2017, ASEAN’s GDP was US$2.8 trillion, similar to that of the United Kingdom and France, whereas the growth rate of all 10 ASEAN member economies has begun to slow down over the last 10 years. However, recent members of ASEAN (Cambodia, Laos, Myanmar and Vietnam) achieved a 6.1% growth rate in 2017 and a higher rate of economic growth than the founding members (4.6% in the same year). In terms of the economic size of the 10 ASEAN economies, Indonesia accounted for 36.7% of the total GDP of ASEAN in 2017, followed by Thailand (16.9%), Malaysia (11.9%), Singapore (11.7%) and the Philippines (11.3%), while the Vietnamese economy recorded a share of 8.7% and continues to show strong growth.
   On the other hand, ASEAN trade is affected by external factors such as the global financial crisis and protectionism, but the trade volume of ASEAN has been steadily increasing due to the aggressive opening policy of ASEAN and high growth of China. The increase in trade with ASEAN is analyzed as being influenced by the attractiveness of foreign investment. Foreign investment is also steadily increasing due to the economic potential of the region as well as aggressive policies to attract foreign investment. Official development assistance (ODA) has also positively influenced the steady economic growth in the ASEAN region. In particular, ODA plays an important role in improving the connectivity of ASEAN in order to bridge the economic gap between ASEAN members with different levels of economic development.
   India also has a large economy (equivalent to US$ 2.6 trillion in 2017) that is comparable to that of ASEAN. Unlike ASEAN, India is characterized not by manufacturing but by service industries. However, since the launch of the Modi government, India has established and implemented the “Make in India” policy to strengthen its manufacturing industry and hence cooperation with Korea will become more important in the future. In addition, foreign investment into India is increasing rapidly. We can identify the labor force, market potential, talented manpower, and English-friendly environment in the nation as main factors to increase foreign investment.
   As previously analyzed, ASEAN and India are emerging as an important region for the global value chain of Korean companies, as exports of intermediate goods account for a larger share of Korea-ASEAN and Korea-India trade in goods. As a result, the investment of Korean companies in both ASEAN and India has been rapidly increasing. In particular, investments are being made in various sectors such as the manufacturing, mining, and service industries. In India, the concentration of manufacturing activity has become more pronounced under the Modi administration.
   Chapter 3 of this report analyzes the current status and strategies of Japan and China on ASEAN and India, and then draws policy implications through comparison with Korea. Overall, Japan's strategy is similar to Korea's, while China's strategy shows many differences. First, Korea and Japan have concentrated their ODA in the Asian region, while China is focusing on the African continent. In addition, Japan is also pursuing ODA strategies in conjunction with the expansion of the global value chain. China, on the other hand, is focused on securing the necessary production resources for its sustained economic growth. Also, while Korea and Japan as a rule do not use ODA for political purposes, China is actively utilizing ODA as a political or diplomatic means. This is because Korea and Japan are members of the OECD Development Assistance Committee (DAC) and are obliged to comply with regulations set by the DAC. On the other hand, since China is not a member of the DAC, it is free to actively seek political compensation after providing loans to countries with high geopolitical and diplomatic importance. Therefore, regarding the ODA strategy for ASEAN and India, Korea is in a competitive relationship with Japan and at the same time shares similar interests, and hence the two nations can expect to cooperate in various areas.
   Chapter 4 of this report analyzes the current state of global value chains in both ASEAN and India and draws implications for Korea's ODA policy based on this analysis. Considering the size of Korea’s ODA support, we selected Laos, Vietnam, Cambodia, Indonesia, and the Philippines among ASEAN member countries and included in the analysis the market potential and future economic cooperation with these countries. After selecting the main export industries of each country, we analyzed the GVC structure by disassembling the exports of the relevant industries in the corresponding countries. The conclusion from this GVC analysis is that Laos and Cambodia have a stronger global value chain structure with China, Indonesia with Japan, and the Philippines and India with the United States; Vietnam alone has formed a strong GVC with Korea, in the textile, clothing, and electric and electronic industries.
   In Chapter 5, we analyzed the relationship between the global value chain and ODA statistically, and also studied how ODA causes changes in comparative advantage as a production base of the country. In particular, ODA can mitigate the shortcomings of developing countries through various channels. First, it can improve the level of infrequent infrastructure through ODA, thus securing a comparative advantage as a production base for multinational corporations. The results of the quantitative analysis also showed that aid for trade (AfT), and particularly AfT for improving the infrastructure, has the effect of increasing the comparative advantage of the production base of the country. On the other hand, aid for enhancing productive capacity and for technically supporting trade policies and regulations failed to produce meaningful results. Therefore, in order to expand the global value chain by expanding production bases through ODA, it is necessary to focus more on policy support for economic infrastructure.
   Based on this analysis, this report proposes aid for trade as the main direction of ODA policy in order to link ODA-centered international cooperation with the expansion and strengthening of the global value chain in new southern regions. As previously analyzed in Chapter 5, the total amount of aid for trade and the size of AfT for economic infrastructure showed that the production base comparative advantage index of the source country was statistically significantly increased. This can be interpreted as an indirect way of expanding and strengthening the global value chain in terms of strengthening the comparative advantage of production bases through the establishment of economic infrastructure of the recipient country, rather than as a direct way to engage local companies in the global value chain.
   this study, we selected the key partner countries by combining the results of the global value chain analysis performed in Chapter 4 with the results of our analysis of foreign relations and ODA status and strategy in Chapters 2 to 3. In particular, we comprehensively evaluated the results of the analysis of global value chains in target countries and industries, together with the possibility of economic development in partner countries, their ODA policies and strategies, non-economic international relations and long-term cooperation strategies. In line with these analyses, we selected Vietnam, Indonesia, India, Laos, Cambodia, and the Philippines as the most promising partners for cooperation in the region, i.e. to expand and strengthen the global value chain of the key export industries in the new southern regions, and recommended ODA cooperation projects be more focused in the areas of aid for building economic infrastructure, enhancing productive capacity, technically supporting trade policies and regulations, and cooperation in non-economic fields, such as culture, academic, and education projects. 

   The purpose of thisresearch is to derive policy implications for Korea by comparing and analyzingthe current status and competitiveness of Korea, China, and Japan in theSoutheast Asian market as part of efforts to achieve diversification and enhancementof Korea's export items. Accordingly, the report analyzed the import patternsof consumption goods in the three Southeast Asian countries (Indonesia,Thailand, Vietnam), the determinants of consumption goods trade between Korea,China and Japan (KCJ) and the three Southeast Asian countries, the policies forpromoting export of consumption goods in KCJ and import barriers in the threeSoutheast Asian countries.
   In Chapter 2, we lookedinto Korea's export trends of prospective consumption goods to Southeast Asiaby analyzing import patters of prospective consumption goods to Indonesia,Thailand, and Vietnam, as well as Korea’s e-commerce trade—the composition ofwhich is largely made up of consumption goods.
   In Chapter 3, this research empiricallycompared and analyzed determinants of products traded in KCJ, Vietnam,Thailand, and Indonesia. The analysis found that unlike the trade of capitalgoods or intermediary goods, consumption goods trade is influenced by culturalsimilarity: the higher the cultural similarity among countries, the more activethe exchange of consumption goods. This is partly because while demandsfor capital and intermediary goods depend on relatively objective rationale,demands for consumption goods are often based on consumers’ preferences orchoice, which are subjective in nature. In this context,the trade of recreational services, such as broadcasting and education, canplay a complementary role in the trade of consumption goods. The study alsofound that consumption goods are more in affected by the e-commerceinfrastructure level than other products.
   In Chapter 4, this research first reviewed andcompared policies for promoting consumption goods and e-commerce in Korea, China, and Japan. Then we examined import barriers in Indonesia, Thailand, andVietnam.
   Compared to Korea, Chinafocusesmore on supervising and its ever-growing e-commerce market andstrengthening its management system, rather than on specific policy supports. Atthe same time, the government is pursuing a trial-based policy in which certaincities and regions are selected as testbeds for cross-border e-commerce, thanthe number is increased eventually to include the entire country. For Japan, itwas found that they exercise only a few direct support policies and even lesssubsidies, while for e-commerce, Japan provides provisions as a guideline forcross-border e-commerce. In this regard, Korean government’s e-commerce supportpolicy is much more direct and specific compared to China and Japan’s. In thefuture, it is necessary to prepare a comprehensive policy response throughcooperation between government ministries and spread success cases byimplementing adequate policy evaluation, etc.
   Next, the import barriers of Indonesia,Thailand and Vietnam in Southeast Asia are found to be relatively high.According to the TradeNAVI Integrated Trade Information Service provided by theMinistry of Trade, Industry and Energy and the Korea International TradeAssociation, Vietnam (49 cases), Indonesia (33 cases), and Thailand (21) aretaking non-tariff measures on various items such as food and beverage, cosmetics,medicine and medical devices. The measures include certification, quarantine,quantity control, technical barriers, etc.
   In Chapter 5, the following policy suggestionswere drawn based on the report analysis, in order to revitalize the consumptiongoods trade in Southeast Asia contents: First, it is necessary to re-evaluatethe effectiveness of Korea's export-promoting policies and preparecountermeasures accordingly.
   Second, it is necessary tocome up with comprehensive measures to promote exports of consumer goods toSoutheast Asian countries in connection with Korea’s New South Asian policy. Tothis end, the government should consider measures to improve the utilization ofFTAs, eliminate non-tariff barriers, establishing a research organization thatprovides in-depth market information, etc.
   Third, efforts to eliminatenon-tariff barriers, simplify import customs, expand Country RecognitionAgreement (CRA), etc. are imperative, as measures to prepare for theKorea-Indonesia CEPA negotiation.  
   Fourth, continuous effortsare needed to expand and supervise the Mutual Recognition Arrangements (MRA)partner countries, in order to reduce the time and cost of import customs andlogistics bound for Southeast Asian countries. 
   Finally, this paperproposed linking Korea’s consumption goods export stimulus policy to its serviceexport promotion policy. 

   This study examines changes in trade-related laws and systems in North Korea and actual trade practices, and analyzes them in accordance with international standards (the WTO regulatory framework). Recently, as the situation on the Korean Peninsula changes rapidly, interest in economic cooperation has risen in hand with the improvements in inter-Korean relations. However, our understanding of the North Korean trade system remains low. In order to prepare for the reform and opening up of North Korea and the resumption of inter-Korean economic cooperation, it is necessary to consider the characteristics of the North Korean trade system and measures to support  advancement.
   The main contents of this study are as follows: an examination of changes in the North Korean foreign trade system from 1990 to 2010, a review of the North Korean trade system and actual trade practices by detailed sectors, and a proposal of improvement plans for the North Korean trade system in accordance with WTO standards.
   Chapter 2 examines the expansion of North Korean trade and changes in related laws and institutions. First, after examining the expansion of North Korea’s trade, explanations are provided in connection with changes in laws and institutions. In addition, we analyze the changes in North Korea-China economic cooperation and the changes in inter-Korean economic cooperation in connection with the changes in the North Korean trade system. In order to understand the problems associated with North Korean trade laws and systems from the viewpoint of South Korea, we discuss the problems caused by the Inter-Korean Exchange and Cooperation Act of South Korea and provide a review of discussions in the 2000s concerning the conclusion of a CEPA between South and North Korea.
   Chapter 3 analyzes regulations and trading practices within North Korean trade laws and trade system. First, we examined the characteristics of the North Korean trade system and changes by period. Next, we analyzed the characteristics and problems of the North Korean trade system proposed by North Korean businessmen in China. In particular, we conducted an analysis of specific areas within North Korean official and informal trade systems, reviewing the areas of commodity and service trade, investment protection, customs clearance and quarantine, trade relief and dispute resolution.
   Chapter 4 examines issues of concern between the North Korean trade system and international standards, especially WTO rules. In order to overcome the lack of related data, we focus on issues and solutions that arose during the process of transition economies joining the WTO.
   In Chapter 5, we examine the issues and areas requiring improvement within North Korean trade laws and systems. First, we looked at how the North Korean trade system should be improved for economic growth, especially for export-led and foreign-funded economic growth. Next, we examined the issues and areas for improvement that must be addressed to establish a CEPA between the two Koreas. Finally, we looked at how North Korean trade laws and systems should be oriented to conclude a Northeast Asian regional trade agreement. In particular, we suggest an improvement strategy for the North Korean trade system, and negotiation strategy of the Korean government, in preparation for the conclusion of a CEPA. In the long run, North Korea should consider normalizing foreign trade and joining the WTO system. Lastly, we propose a negotiation strategy that takes into consideration the necessary process of persuading WTO members.
   The results of the study indicate that North Korea’s efforts toward legalization were not sufficient to lead the expansion of its trade. Although there have been efforts to establish a proper institutional framework to attract foreign capital into North Korea in the form of foreign investment, inter-Korean trade, and economic cooperation, there are numerous cases demonstrating how institutional devices to protect investors remain insufficient in terms of their actual enforcement. The partial rule of law within North Korea limits the quantitative and qualitative growth of trade, restricts North Korean trade participants to only North Koreans, and restricts the actual binding effect of trade-related legislation even if they are enacted. Improvement will be needed in these areas.
   It appears that North Korea will have no choice but to adopt a strategy that centers on FDI and export-led growth policies, as many Asian countries have, and this will likely proceed in the three stages of signing a CEPA between South and North Korea, concluding regional trade agreements in Northeast Asia, and accession to the WTO. In this process, North Korea will need to: (1) improve its tariffs and non-tariff barriers, (2) solve the problem of partial rule of law, (3) gain the trust of the international community and resolve disputes, and (4) conclude international trade agreements and cultivate human resources. In addition, in order for North Korea to maintain good foreign trade relations and attract investment from the international community, it will be necessary to faithfully carry out trade and investment contracts, to ensure the recovery of profits stemming from investment, and to resolve outstanding debts.
   We hope the findings of this study can offer valuable proposals for the reform of North Korea’s trade system to be considered during the negotiation process of an inter-Korean CEPA. The study is also significant in that it provides general reference data on the trends and characteristics of trade-related laws and regulations within North Korea, which will play a key role in the transition process of the North Korean economy. 

   Law amendments with reference to the EU General Data Protection Regulation (GDPR, henceforth) are flooding in Korea. It signals that GDPR is one way or another treated as a landmark for regulatory policy on data space. However, a point to see before such benchmarking is whether GDPR itself is compatible with the WTO Agreement. If not, Korea is likely to suffer from the same trade conflicts as the EU would face. Motivated by the concern, this study seeks to figure out key trade issues of Korea’s recent law amendments inspired by GDPR.
   The GDPR applies to all companies processing the personal data of data subjects residing in the EU, aiming to protect its citizens from privacy and data breaches as well as to facilitate free flow of data in the region. One of the major features of GDPR is the extended jurisdiction, so that it applies to the processing of personal data of the EU data subjects by a company not established in the EU. Non-EU businesses processing the data of EU citizens must appoint a representative in the EU to meet the obligations imposed by GDPR. Such requirement to appoint a local representative may be understood as a compliance measure in the GATS context.
   There is another kind of compliance measure, so-called ‘adequacy test.’ A country outside the EU should be recognised by the European Commission as having adequate protections in place in order to freely transfer personal data to somewhere outside the EU. It is the Commission that makes the final decision on adequacy status. Alternative route for a company without regional establishment to secure adequacy status for offshore processing personal data of EU citizens is to get an approval from supervisory authorities of EU Member States. In such instances, it is necessary for the company to adduce adequate safeguards for the protection of privacy and personal data.
   Is extraterritorial jurisdiction or adequacy test of GDPR trade-friendly then? Despite the lack of any available legal basis in trade agreements, the GATT dispute settlement panel once rejected extraterritorial jurisdiction because it would undermine the legal security of the multilateral trade framework. Adequacy test has potentially severe problems in terms of the GATS consistency. It is basically a discriminatory measure by reasons of origin, so that services and service suppliers are presumed to be of like. Unless such differential treatment is effectively justified by some other characteristics inextricably linked to such origin, it could constitute discrimination under MFN or national treatment obligations on a case-by-case basis. It deserves special attention for the EU to have a safeguard against such potential violations, none other than the GATS Article XIV (General Exceptions). In fact, this option is feasible for the EU because adequacy test is a compliance measure. Recourse to GATS Article XIV is available on the condition that challenged measure is a compliance measure, as far as it may be concerned with protection of privacy and personal data.
   Korea has been maintaining strong opt-in regulation on cross-border data transfer including personal data and space information. Contrary to regulation on space information equipped with solid national security ground, regulation on personal data transfer overseas is relatively vulnerable to trade friction. Views are spreading that Korea should change its policy stance to cope with the 4th industrial revolution, a common saying since 2016. Public sentiment still seems to put more weight on data sovereignty than usage in light of the recent law amendments. Patterns are unusual in law-making. Legislation is lingering in the Personal Information Protection Act that is the general law on the protection of personal data. In contrast, legislative efforts are very active in sectoral laws such as the ‘Telecommunications Business Act (TBA, henceforth)’ and ‘Internet Multimedia Broadcast Services Act (IMBSA, henceforth).’ Seemingly having little connection to the protection of personal data, they frequently adopt extraterritorial jurisdiction, local representative appointment requirement and adequacy test of GDPR.
   There are more to mention. Benchmarking GDPR, amendment bills of TBA and IMBSA claim to stand for relieving reverse discrimination in regulation. In a word, bill drafters presumably intend to solve regulatory issues induced by cross-border supply of value-added telecommunications services through capitalizing extraterritorial jurisdiction and local representative appointment requirement of GDPR. However, it is not unlike we try to open the lock with a wrong key. Figuratively speaking, it is a crossbite between means and end. Regulatory approach of this kind often leads to trade conflicts.
   Much more serious attention is due to two elements of the amendment bill of ‘Act on Promotion of Information and Communications Network Utilization and Information Protection, etc.’ One is the reciprocity provision and the other is the local server requirement. Aiming to authorize overseas transfer of personal data on a reciprocal basis, the former is scheduled to go into effect very soon. This clause is obviously a measure by origin discriminating between foreign online service suppliers. Without MFN exemptions registered in any trade agreements, Korea has no authority to implement such a measure. Although the latter is pending at the National Assembly, it is highly likely to run counter to Korea’s market access and national treatment obligations in the context of GATS and KORUS FTA as well. Therefore, repealing the amendments is greatly advisable to stop Korea from being embroiled in unnecessary trade disputes.