This report identifies the opportunities and challenges present in post-war reconstruction programs of Ukraine, and provides implications for the participation of Korean companies. The study comprehensively analyzes past post-war reconstruction cases and recent international community discussion trends through review of literature on the subject, statistical analysis, expert interviews, and attendance at international conferences. While there is great interest in post-war recovery in Ukraine throughout the international community and Korea, it is difficult for governments and businesses to expand their participation due to the continuing uncertainty surrounding war conditions, and the lack of specific information on funding methods or investment profitability. As large-scale investments will certainly be made for Ukraine’s recovery after the end of the war, it is necessary to carefully design the government’s participation in international community discussions and the direction of corporate investment, considering the current war situation and overall conditions.

Chapters 2–4 of this report conducted research on three major topics to provide reference materials for the participation of the Korean government and businesses in Ukraine’s post-war reconstruction programs.

In Chapter 2 we conduct an analysis of major past post-war recovery cases to present the main principles and precautions for participating in reconstruction projects. More than simple restoration of destroyed infrastructure, post-war reconstruction should be seen as an opportunity for a comprehensive overhaul of economic and social systems. This was evidently observed in cases such as the Marshall Plan after World War II, U.S. aid after the Korean War, and the reconstruction of the West Balkans in the 1990s. The Marshall Plan contributed to European economic recovery and the establishment of a market economy system, while in Korea’s case, U.S. aid laid the foundation for a liberal system. The Balkans are still undergoing reconstruction with EU-centered support, but challenges remain. Lessons learned from these cases are as follows: First, economic aid is effective when linked to improvements in the recipient country’s political and economic structure. Second, support tailored to the recipient country’s situation is necessary. Third, support that benefits both donor and recipient countries is important. Fourth, international cooperation enables the mobilization of funds to meet reconstruction needs and build international order. Korea’s participation in Ukraine’s reconstruction should also consider these points and participate not only in facility restoration but also in institutional improvement and international peacekeeping efforts.

Chapter 3 examined the current status of international community discussions on Ukraine’s reconstruction, the costs and direction of Ukraine’s reconstruction projects, governance, and key contents of core projects. Since the outbreak of the Russia-Ukraine war in February 2022, discussions on Ukraine’s reconstruction projects have been active in the West. Major Western countries and international organizations intend to modernize social infrastructure and integrate Ukraine into the EU economy. This will be enabled through attracting large-scale investments, EU integration, and application of digital and net-zero technologies, which are the main topics discussed in a series of international conferences on Ukraine’s recovery. As of the end of December 2023, the total amount of damages sustained by Ukraine and its needs are estimated at $486 billion, about 2.8 times Ukraine’s nominal GDP in 2023. The reconstruction costs are expected to increase as infrastructure continues to be destructed due to the war. Energy, transportation, housing construction, and health are the key areas that should be most urgently recovered. We summarized major projects and implementation plans for each area at the end of this chapter.

In Chapter 4, we examine the magnitude of support toward Ukraine’s reconstruction by international organizations and major countries, and discussed how to mobilize public and private funding considering sustainability and risk management. As Ukraine’s fiscal instability deepens due to uncertainties from the prolonged war, it heavily depends on support from international financial institutions such as the IMF, World Bank, EBRD, and major countries including the EU, G7, and Poland. To this end, the Multi-agency Donor Coordination Platform (MDCP) was launched in January 2023 to coordinate short- and mid- to long-term Ukraine support directions and mechanisms among various donors. This reflects the international community’s common understanding that international support alone is clearly limited for Ukraine’s stable recovery and reconstruction, and that attracting private capital is essential. The international community now discusses ways to utilize frozen Russian sovereign assets as reconstruction funds within legally possible limits, and an agreement has been reached at the G7 level on how to use the annual interest income from frozen Russian assets. In addition, discussions on practical risk management measures such as strengthening public-private partnerships (PPP), compensation for losses due to political and commercial risks, and customized policy support are deepening to activate private funding.

Based on these research results, Chapter 5 presents the current status of Korean companies’ participation in Ukraine’s reconstruction projects and future support measures. Korea is paving the way for its companies to participate based on the EDCF basic agreement with the Ukrainian government and six leading projects. The One Team Korea Ukraine Reconstruction Cooperation Delegation includes not only government ministries such as the Ministry of Land, Infrastructure and Transport and the Ministry of Oceans and Fisheries, but also public enterprises such as Korea Land and Housing Corporation (LH), Korea Water Resources Corporation, and Korea Overseas Infrastructure & Urban Development Corporation (KIND), as well as some private companies exploring the possibilities of reconstruction projects. To facilitate their smooth participation in reconstruction projects, this report proposes six support measures: first, establishing a pan-ministerial support organization under the Prime Minister for formulating reconstruction participation strategies and overseeing related ministries; second, supporting the development of integrated public-private partnership (PPP) projects throughout the project lifecycle; third, providing investment information in six key areas: energy, transportation, housing, infrastructure, industry, and complex fields; fourth, mitigating investment risks through the development of insurance products, participation in consortiums with major donor country companies, and utilization of MDCP; fifth, joint entry into reconstruction projects using Poland as a base; and sixth, strengthening bilateral cooperation with Ukraine, including KSP projects, and joint participation in multilateral cooperation.

The war will end someday, and regardless of how it ends, massive resources will certainly be poured into post-war recovery. Korea needs to set the right direction and prepare now so that it can contribute to this historic post-war reconstruction. The economic benefits gained by participating companies will be given as a bonus.

This research studies the role of international trade in the economic growth paths of five Southeast Asian nations (Indonesia, Malaysia, the Philippines, Thailand, and Vietnam). We evaluate the export-led growth strategies of the five nations and derive policy implications for Korea.

Chapter 2 elaborates on the economic growth paths of the five nations from the perspective of economic growth convergence. Introducing the comparative approach with growth convergence analysis allows the authors to delineate how the economic growth paths of these five Southeast Asian nations should be understood in terms of the speed and magnitude of the convergence. We find that the speed and magnitude of growth convergence in the five Southeast Asian nations are faster and more prominent compared to the world average. Country-specific estimations confirm that economic convergence is significantly explicit in Malaysia and Thailand, resonating with “middle-income trap” diagnoses on both nations.

We extend discussions by comparing growth convergence in these five Southeast Asian nations to that in the three East Asian nations of China, Japan, and Korea. Growth convergence is significantly identified in four nations: Japan, Korea, Malaysia, and Thailand. These four nations have already experienced rapid economic growth. Malaysia and Thailand followed convergent growth paths before joining the high-income group, and this is marked as a big difference compared to Japan and Korea, where growth convergence started after they had become high-income nations.

In nations currently undergoing accelerated economic growth, such as China and Vietnam, economic growth convergence is not statistically significant. We also could not find evidence of growth convergence in Indonesia and the Philippines. As growth convergence cannot be directly linked to growth slowdown, we analyzed the dynamics of structural change in four nations (Indonesia, Malaysia, the Philippines, and Thailand) that have accessible sectoral data. We ascertained whether a sector with higher productivity attracts more labor share within a national economy. If this productive labor reallocation is shown to occur, we can say that a country is going through growth-enhancing structural change, which is a critical factor for long-run rapid growth. According to our estimations, neither of these four nations is going through growth-enhancing structural change.

Chapter 3 clarifies how exports in the five nations are related to their economic growth. We obtain country-level export productivity measures following existing literature and estimate how export productivity can explain the economic growth of each nation. In Indonesia, Thailand, and Vietnam, export productivity has contributed to economic growth. However, in Malaysia and the Philippines, export productivity has not contributed to economic growth. The five nations are actively implementing export-led growth strategies to overcome the “middle-income trap” and accelerate their entry into a high-income economy. Chapter 4 comprehensively reviews and evaluates the history of export-led growth strategies in the five nations.

Chapter 5 extends the discussions in Chapter 4 by focusing on recent export-led growth strategies in the 2020s. Indonesia’s Making Indonesia 4.0 project and National RPJMN five-year plan, Malaysia’s New Industrial Master Plan 2030, National Trade Blueprint 2021-2025, the Philippines’ Philippine Development Plan 2023-2028 and Philippine Export Development Plan 2023-2028, Thailand’s 13th National Economic and Social Development Plan (NESDP), Thailand 4.0 Strategy and MoC Action Plan, and Vietnam’s Strategy on Exports and Imports and expansion of its trade promotion agency (VIETRADE) are introducing export-led growth strategies under the goals and constraints that these five nations are facing. All strategies target the maximized utilization of their respective comparative advantages to promote export growth and job creation.

Based on the recent export-led growth strategies of the five nations outlined in Chapter 5, we derive implications for Korean trade and investment in the areas of ① country-specific optimized cooperation, ② critical minerals/food supply chain cooperation, and ③ cooperation in future strategic industries. First, in the first area, country-specific optimized cooperation, some of the flagship projects in Chapter 5 could provide mutually beneficial business opportunities with Korea. For example, Malaysia clarifies its goals in aerospace industries in its New Industrial Master Plan 2030. Korea established the Korea Aerospace Administration (KASA) in 2024, which is poised to expand its activities in international cooperation. The Philippine Export Development Plan 2023-2028 suggests how the Philippines can utilize comparative advantages in labor-intensive sectors to attract investment. This can provide incentives for Korean businesses concerned about labor costs in Korea and its low fertility rate issues.

In the second area, critical minerals/food supply chain cooperation, we focus on national strategies provided by Indonesia, Malaysia, and Vietnam. As a net importer of critical minerals and food, Korea can proactively suggest cooperation packages through which it can contribute to the economic security of Korea and export promotion of the five Southeast Asian nations. For the third area, cooperation in future strategic industries, Korea can collaborate with all five nations in green transition, digital transformation, and semiconductor industries, which are commonly mentioned in each nation’s national strategies in Chapter 5. Working with Korean businesses allows these nations to avoid a dichotomous choice issue between the US and China. Also, as Korean businesses have already attained considerable local networks in ASEAN economies, they can serve as key contributors in constructing an ASEAN-friendly global value chain in future strategic industries.

This paper delves into the perceptions of urban residents in developing countries on climate change, underscoring the importance of these insights in formulating effective climate policies. As urban areas in these regions experience rapid growth and heightened vulnerability due to climate impacts, understanding local perspectives becomes crucial for both mitigating and adapting to climate change effectively.

The study contributes to the body of knowledge on public perceptions of climate change, focusing particularly on the urban populations of developing countries. Despite existing literature on the subject, there remains a scarcity of research concerning cross-national variations in climate change perception within this demographic, which this paper seeks to address. To gather detailed empirical evidence, we conducted an online survey with participants from eight major cities in countries across Africa, Latin America, Southeast Asia, and South Asia. The survey primarily assessed climate change awareness, the perceived personal impact of climate changes, and evaluations of governmental and international responses.

The findings reveal that awareness and concerns about climate change significantly differ among urban populations, influenced by educational level, economic status, and direct climate impact experiences. Furthermore, the study explores the heterogeneity in perceptions, which is shaped by a complex interplay of demographic and socio-economic factors. This diversity in perceptions impacts the public's willingness to engage in climate change adaptation measures and supports varied policy preferences at the domestic and international levels.

Also, the findings emphasize the necessity for policymakers to consider the diverse perceptions of urban residents when implementing climate policies. Engaging these communities in developing countries is crucial for achieving widespread support and effective climate action. This approach aligns with the broader goals of sustainable development and international cooperation on climate challenges. By gaining a deeper understanding of varied urban perceptions, policymakers can more effectively prioritize actions and allocate resources in areas where the impact of climate change is most severe and the potential for meaningful change is significant.

In the context of the prolonged and structured U.S.-China strategic competition, the three countries which we examine - the United States, China, and the Republic of Korea (ROK) - must find ways to maximize their respective national interests and value. Nevertheless, due to a lack of mutual understanding between the three countries, they are focusing on attacking each other’s vulnerabilities rather than on long-term strategies for cooperation and competition, thus maximizing their costs. This study is motivated by the need to discuss an approach that conceptualizes the U.S.-China-ROK triangle as a multi-dimensional matrix to address these issues.

This study aims to examine points of conflict and interdependence within the trilateral relationship between the Republic of Korea, the United States, and China. As the dynamics in the trilateral relationship become more complex, progress can be limited and strategic planning becomes more challenging. Thus, this study begins with the premise that it is difficult to perform three-dimensional analysis by examining only the interaction of the three bilateral relationships that form a triangle. In addition to demonstrating the demand for each other, as well as conflicts that may result from consideration of core interests in the interaction of bilateral relations, this study seeks to explore the possibility of stereoscopic and three-dimensional analysis of trilateral relations as a whole.

Building upon this study, the United States and Republic of Korea should work in the direction of expanding their intersecting areas while reducing areas of divergence. The ROK’s strategy should be to increase convergence with the United States and decrease divergence with China. By doing so, it can expand the space for coexistence with China and strengthen its trust relationship with the United States. With the intersection of the U.S.-Korea relationship expanding, it is natural for crises in the Sino-Korea relationship to arise, but there are gaps and places of coexistence within the U.S.-China strategic competition if the parties understand each other’s priorities and red lines and expand the intersections within Korea-China relations.

Satellite data have been used to observe Earth phenomena in a wide range of scientific disciplines, but recent advances in access to satellite data and in the technology required to process them are expanding their use in the social sciences, especially for disadvantaged countries that lack in the capacity to produce statistics or the types of statistics available. Satellites observe the world on the same basis, at regular intervals, and with detailed geographic coverage.

North Korea is one of the most underdeveloped countries in the world in terms of statistic data. It publishes very limited economic statistics, and while the outside world may provide estimates of GDP and other statistics, the reliability of these estimates is often questioned due to the lack of raw data. Therefore, recent attempts have been made to analyze the North Korean economy using satellite data.

This study makes a new contribution to the literature on North Korea’s economy using satellite data in two ways. First is the object of the study. Existing studies utilizing satellite data usually analyze at the regional and national levels. Considering the importance of enterprises and the abundance of satellite data and spatial information on enterprises, this study uses satellite data on 179 major enterprises in North Korea to create indicators to measure corporate activities, which are then aggregated at the sub-industry level to create industry indicators. In North Korea, microdata at the firm level is almost non-existent except for the database on frequency of news reports. Industry level statistics are also limited to Bank of Korea’s estimates on GDP by high-level industry classification, namely light and heavy chemical industries for manufacturing, and output of a few items, making it difficult to analyze detailed industries. This study utilizes satellite data on major North Korean companies to generate firm-level indicators of entrepreneurial activity, which are then aggregated at the industry subcategory level to generate industry-level indicators for 41 industries.

Second, this study utilizes new satellite data. Previously, most of the satellite data used to observe North Korea’s economy were based on nighttime light levels. This is because nighttime illumination is widely used and reliable as an indicator of income level in the field of economics due to the close correlation between electricity consumption and economic activity. However, the usefulness and reliability of nighttime light has been questioned in North Korea’s unique economic environment. This is because nighttime light observations are made around 1 a.m., when economic activity in North Korea is unlikely to be active, and electricity consumption may not necessarily reflect economic demand when considering the authorities’ monopoly on electricity distribution.

In this study, we aimed to observe the North Korean economy by utilizing land surface temperature captured during the daytime and SAR satellite imagery which can be observed regardless of weather conditions, in addition to the nighttime light data. The surface temperature data was used to index the temperature of the production sites of enterprises, and the SAR satellite images were used to measure the changes in goods loaded in outdoor areas within the enterprise area. Nighttime light data was used to measure the amount of light generated by enterprises at night. As all three are generated by different methodologies utilizing different satellite data, the indicators are expected to reflect different aspects of North Korean enterprises and industries by observing different aspects of firm activities, such as disparities between night and day, inside factories and outdoor areas.

The use of satellite data to generate economic statistics is a recent development and there is no established methodology. It is also the first time that such an attempt has been made for North Korean firms and industries. Therefore, this study evaluates the explanatory power and limitations of the satellite-based economic indicators generated in this study at the firm and industry level. At the firm level, we evaluate the alignment of satellite-based firm indicators with production and investment activities and the macroeconomic environment as reported by North Korean media for nine major North Korean factories. At the industry level, we generated industry indicators by weighting and averaging the enterprise indicators across sub-categorized industry units, and compared them with economic statistics such as trade and output estimates.

The organization and main content of each chapter is as follows. First, Chapter 2 reviews previous studies on economic analysis using satellite data, especially attempts to measure economic activity, and describes the research methodology and data used in the literature. Four steps were taken to derive satellite-based economic indicators: first, target firms were selected, spatial information of firms was acquired and overlaid with satellite data, and economic indicators were generated by processing satellite data at the firm level. As described above, three types of indicators were generated: the “temperature gap” metric using temperature is the average temperature gap between the production and non-production areas of a company’s premises. The "illuminance gap" metric, which uses nighttime light levels, subtracts the national average nighttime light level from the average nighttime light level of the enterprise to control for the effects of power supply at the national level. Finally, using SAR satellite imagery, we created a "load change" metric, which is the percentage of the outdoor area of a company’s property that shows a change in visible goods between two consecutive satellite images.

We then examined and briefly characterized the changes in the distribution of the three indicators (temperature gap, illuminance gap, and load change) by time, industry, and company size. In the case of temperature gap, the level of temperature gap progressively decreased throughout normal years (2013-2016), the UN sanctions period (2017-2019), COVID-19 period (2020-2022), and Post-COVID period(2023) in the lower-end companies, while in the upper-end companies, there was no significant change in the UN sanctions period and a decrease in temperature gap was observed in the COVID-19 period. For illuminance gap, the level of illuminance gap consistently improved across the four periods, especially for larger companies. In terms of load change, the lower-ranked firms showed similar characteristics to the temperature gap as the level of load change decreased over time, while the higher-ranked firms showed mixed changes during the UN sanctions and COVID-19 periods, but a consistent increase in the area of load change during the post-COVID period. By industry, the temperature gap was higher in the heavy chemical industry, including primary metals and transportation machinery, while the illuminance gap was higher in the transportation machinery, electrical and electronic, and chemical industries, and load change was higher in the transportation machinery, machinery, and electrical and electronic industries. Within industries, the variation between firms was higher in light industries such as textile and apparel and food and beverage services. Finally, by firm size, temperature gap was strongly positively correlated with firm size, while illuminance gap and load change were not.

Chapter 3 examines the explanatory power of the three satelliteindicators for nine major enterprises: Kimchaek Iron and Steel Complex, Cheonlima Steel Complex, Heungnam Fertilizer Corporation, Namheung Youth Chemical Complex, Taean Heavy Machinery Complex, Sinuiju Textile and Chemical Complex, Hamhung Disabled Soldiers’ Essential Plastic Goods Factory, Kim Jong Suk Pyongyang Textile Factory, and Pyongyang Goksan Factory. The extent to which the satellite indicators explained the production and investment activities of major enterprises varied across enterprises and time periods, and was not complete. Nevertheless, certain conclusions can be drawn: temperature gap is related to the production of enterprises, especially in the heavy chemical industry. The illuminance gap tended to increase during periods of large-scale capital investment and construction, suggesting that it is generally related to investment activities. In the case of Kim Jong Suk Pyongyang Textile Factory and Pyongyang Goksan Factory, it was also consistent with production activities. In the case of load change, unlike other indicators, it was difficult to find a consistent relationship with business activities due to the short time period (2017-2023), but in the case of the Taean Heavy Machinery Complex and the Hamhung Disabled Soldiers’ Essential Plastic Goods Factory, we found a relationship with business activities. On the other hand, we also detected a possibility of measurement error due to the influence of temperature and illumination in the surrounding area, and upward and downward rigidity of the temperature gap variable, among other factors.

Chapter 4 examines the explanatory power of satellite indicators compared to economic statistics at the industry level. We examine the correlation between economic statistics and satellite-based industry indicators for a total of 16 industries for which we have output estimates at the industry subdivision level, or for which we can construct trade statistics on intermediate goods imports, final goods imports, or final goods exports related to the industry. Only the temperature gap and illuminance gap variables generated industry-level indicators, while load changes were not used in this chapter due to the small number of firms for which data were available.

The analysis shows that temperature gap is correlated with economic statistics at least moderately for nine heavy chemical industries and four light industries, with higher correlation coefficients for heavy chemical industries. In the case of illuminance gap, economic statistics and satellite-based industrial indicators were correlated for two heavy chemical industries and one light industry, showing a lower correlation with industrial production than temperature gap. To assess the overall explanatory power of satellite-based industrial indicators, we conducted a fixed-effects model analysis of the correlation between trade statistics and temperature and illuminance. The results show that each of the temperature and illuminance gaps are significantly and positively correlated with the economic statistics, but only the temperature gap is significant when considered together, suggesting that the temperature gap is more relevant to production. Also, when separating heavy and light industries, the positive relationship is significant only for heavy industries.

The above results show that the satellite-based enterprise and industry indicators derived in this study reflect economic activities at the enterprise and industry level to some extent. However, there are limitations to the satellite-based economic indicators developed in this study that prevent them from accurately measuring North Korea’senterprise and industrial production. We found a number of limitations in the satellite data itself, such as glare in the nighttime data, and in the methodology for calibrating the satellite data and derivingindicators, such as making considerations for firm size and seasonality. Therefore, it is recommended that the indicators developed in this study be used as a supplementary data source. Nevertheless, given the scarcity of North Korean economic statistics, this study is significant in that it presents a new methodology for analyzing the North Korean economy using satellite data and confirms certain explanatory power. Further development of the methodology can be expected to expand our understanding of the North Korean economy.

Recent regulatory proposals on competition in digital markets, such as the EU’s Digital Markets Act and Digital Services Act, emphasize the importance of ensuring fair competition in markets to sustain innovation and avoid long-term monopolies. There is a growing concern that markets are becoming increasingly concentrated, with a small number of data-rich companies gaining prominent positions in horizontally or vertically linked markets and large user bases. This report identifies considerations for introducing policies to mitigate the market power of data-rich global digital platforms and protect the openness of digital ecosystems for potential new entrants. To this end, we examine data-related regulatory trends in major countries and theoretically discuss the implications for inter-platform competition when data gives digital platforms a competitive advantage. We then focus on data portability, the most prominent data-related regulation of digital platforms, to explore the impact of data portability regulation on digital platform competition.

This study largely consists of five main parts. Chapter 2 outlines the basic characteristics of the platform economy, including its multi- sided nature and indirect network effects, and describes the role of data in the platform economy, in order to better understand the discussion that follows. Indirect externalities are prominent in digital platforms, which are intermediaries that allow multiple independent groups of economic actors to interact through digital connectivity, due to their two-sided market nature. If one side can initially attract a certain number of people to the platform, it becomes easier for both sides to attract additional platform users in a virtuous cycle through indirect network effects, making it easier for market tipping than in other markets. In these digital platform markets, data is utilized to improve the quality of services provided by the digital platforms and to expand their user base. Digital platforms collect, process, and analyze personal-level data generated from users’ interactions with the platform after obtaining their consent. As more data is accumulated, search and recommendation results are tailored to the user, which increases the utility or profitability of the platform for both users and merchants. Digital platforms can also collect and use data to create new business opportunities. By merging with other digital platforms, or by entering the market for complementary services, digital platforms can create additional commercial value by combining their own data with that of other platforms.

In Chapter 3, we examine the current state and future prospects of antitrust regulation in key countries, focusing on issues related to data concentration. While the need to regulate data concentration on global digital platforms has been increasingly recognized as monopolies impede sustainable innovation, appropriate regulatory measures have not been implemented due to the potential negative impact on innovation through regulation of digital platform data and the risk of falling behind in competition in the global marketplace, both domestically and globally, if there are competing domestic players in the country. In the U.S., five antitrust bills targeting digital platform companies were introduced in the U.S. House of Representatives in June 2021, but all but the Merger Filing Fee Modernization Act were abandoned. The EU has emphasized privacy and personal data protection and has included the right to data portability in the GDPR, which to some extent limits the tendency of global digital platform companies to monopolize data. In addition, the EU recently enacted the EU Digital Markets Act(DMA) and the EU Digital Services Act (DSA). Through the DMA, gatekeepers are obliged to ensure the free portability of data generated through end-user activities and to provide business users and authorized third parties with free access to and use of data, including personal information. In China, where domestic platform companies dominate the local market, no specific laws or policies have been issued to address the issue of data monopolization by dominant platforms. In South Korea, where there is significant competition between domestic digital platforms and foreign platforms, the KFTC has been strengthening its regulatory focus on platform monopolies. The KFTC considers each operator’s ability to collect, retain, and utilize data, gaps, and the possibility of competitors’ access to data when assessing market dominance, and is expected to consider the effect of increasing entry barriers through data and the possibility of transferring dominance in platform merger reviews. The Online Platforms Bill, which stipulates data portability so that dominant platforms can safely move data from user to user with the user’s consent, has beenproposed, but there are also warnings that it could act as a de facto regulation of domestic platforms and stifle innovation.

In Chapter 4, we explore the impact of data on competition among digital platforms, based on the findings in the previous literature. First, we review the findings on whether more data gives digital platforms a competitive advantage. While more rigorous analysis is still needed, as that many of the analyses are based on limited levels of firm data, most previous studies suggest that more data has a largely positive impact in terms of making predictions about consumer profiles, preferences, and behaviors. And if data gives digital platforms a competitive advantage, how does this affect competition between platforms, based on prior research? We summarize prior research that has modeled the process by which digital platforms gain a competitive advantage from data, by using data collected from consumers as an input to innovation activities to provide higher quality services to consumers. We find that there is a first-mover advantage among platforms competing for R&D investments based on data. Unless the initial quality of the entrant’s service is sufficiently high, the first mover will invest aggressively, and the difference in demand between the two platforms will not decrease once it occurs. The effect of a data sharing policy as a policy to address this problem is that competitors who are somewhat competitive in initial service quality or who can compete with the market leader in terms of innovation efficiency will decide to enter the market and engage in innovation competition in the market over a long period of time. The welfare effects of data sharing policies are ambiguous but generally positive.

In Chapter 5, we examine the impact of data portability regulation on competition on digital platforms as data portability regulation is one of the most prominent data-related regulations. In particular, we analyze the consequences for competition between gatekeepers and potential market entrants given the asymmetric nature of data portability regulation in the recently implemented EU DMA, where obligations are imposed only on market dominant firms. We find that when data portability regulation is imposed only on the market leader and the entrant is less productive, the entrant, despite its lower productivity, can leverage the rent from tying future consumers in the initial price competition phase and eventually displace the gatekeeper and capture the market. In such cases, regulatory asymmetries can lead to the displacement of efficient producers by inefficient producers, thereby reducing social welfare.

In Chapter 6, we discuss the implications for data-related competition policy for digital platform markets. We assess economic benefits and costs of policy measures related to limiting the ability of market- dominant platforms to collect more user data and combine different datasets, such as reducing data retention periods, restricting combinations between different data, limiting app pre-installation and default settings, and restricting lines of business. We also examine measures to improve access to data from dominant platforms, divided into two categories: data sharing by a broad range of users and data sharing by specific users, taking into account the general direction of adoption and the characteristics of different types of digital platform markets.

For the purposes of this study, export measures refer to the general policies by which a country imposes restrictions on the flow of its exports as a means of achieving certain objectives. Modern export measures can be broadly categorized into export restrictions, export controls, and economic sanctions based on their objectives, targets, and underlying laws. The number of export measures imposed by governments has increased in all three categories in recent years. Understanding the impact of export measures along global supply chains, where companies are intertwined in complex trading relationships, is an essential step in developing policy responses to achieve the goal of supply chain stabilization. This study aims to improve the overall understanding of export measures by examining the background and economic effects of export measures, an area which has received relatively little attention in the literature on international trade, and the changes in supply chains as a result of export measures.

In Chapter 2, we examine some of the most prominent examples of export measures dating back to the Industrial Revolution, examining the policy objectives they sought to achieve, the extent to which they actually helped to achieve those objectives, and the circumstances under which they were successful as policy instruments. We also examine several studies analyzing the economic effects of export measures in the post-Cold War era, and suggest recommendations for implementing and responding to export measures.

The main findings of Chapter 2 are as follows. Export measures during the Industrial Revolution were primarily aimed at preventing the outflow of advanced technologies. At the time, export measures had many characteristics similar in context to the present-day U.S.-China hegemonic rivalry in that there were competitions between leading countries with advanced technologies and countries trying to catch up, the international movement of manufacturing equipment and technicians was recognized as a major channel of technology spillovers, and laggard countries enjoyed technology spillovers which might infringe on intellectual property rights from leading countries. However, over time, export measures have become less effective in preventing technology leakage because improvements in intellectual property rights systems and the sophistication of production technologies have made technology spillovers involved in offshoring of manufacturing equipment and technicians less efficient. This suggests that the effectiveness of high-tech export control today may also change depending on the strengthening of IPR norms and the path of technological development.

The post-World War II period was characterized by export measures that were implemented primarily for national security reasons. In particular, the CoCom, a multilateral export control system organized by the United States and its allies, was effective in controlling the flow of military goods and related technologies to the communist bloc in the early stages of the Cold War. The success of the CoCom is attributed to the sharp confrontation between the West and the Communist bloc and the slow pace of the development in cutting-edge technologies. However, over time, industrial diversification, accelerating technological change, and the sophistication of global supply chains and value chains have rendered the CoCom system increasingly ineffective, as countries have different interests and trade patterns with the Communist bloc, and it has become more difficult to detect export-controlled items. These limitations are also observed in the later multilateral export control organizations. The success of multilateral export control regimes can only be ensured if they are flexible and aligned with the interests of countries and reflect the rapid pace of technological development. To this end, export control regimes should be designed to reduce the incentives for countries to deviate, for example, by differentiating the items subject to export control or by introducing an export license system that takes into account the economic necessity of the exporting party. In addition, a bottom-up system based on efficient information sharing should be introduced to ensure that market decisions are reflected quickly.

Modern export measures implemented in the post-Cold War era have not only failed to achieve their intended goals, but have had negative long-term effects. Export control policies implemented by the U.S. to maintain a competitive edge in the aerospace industry have not served to strengthen U.S. industrial dominance. During the 2007-2008 food crisis, restrictions on grain and food exports from Russia, Ukraine, and Southeast African countries actually increased price volatility in their home markets. In particular, wheat export restrictions in Russia and Ukraine resulted in price misalignment with international markets, increased price volatility, and market uncertainty, which discouraged wheat producers from investing, in turn reducing industrial productivity in the medium to long term. Timber export restrictions in the U.S., Canada, Costa Rica, Indonesia, and Ghana have led to inefficient resource allocation and a long-term decline in the productivity of the country’s timber industry. China’s export restrictions on rare earths served their purpose in the short term by increasing the market power of Chinese rare earths in international markets, but over time, China’s market power declined again as rare earth production outside of China increased, substitutes for rare earths were developed, and more countries began to recycle rare earths. The Chinese Ministry of Commerce’s technology export controls restricted potential demand from companies in related industries, lowering corporate profits and increasing the transaction costs of new technologies, leading to a decline in investment as the benefits of R&D investments diminished. Export measures can have unexpected economic spillovers, so when they are unavoidable, countries should work with like-minded countries to reduce uncertainty and build policy safety nets to protect economic entities that are vulnerable to the economic impact of export measures. Ultimately, given that export measures can have negative impacts on both the target and the enforcing countries, international cooperation on reducing export measures is recommended.

In Chapter 3, we categorized contemporary export measures into three categories based on purpose, target, and international law or regime: export restrictions, export controls, and economic sanctions. We carefully examined the legal and institutional basis and practices of each type of export measures, and drew implications for each type of measure.

Export restrictions are policies that prohibit or limit exports for the purpose of meeting demand within the exporting country, protecting the environment, and preserving natural resources. Such restrictions are generally prohibited under Article 11 of the GATT, but they are allowed in exceptional cases such as shortages of essential goods, environmental protection, and natural resource protection. Examples of export restrictions include China’s restrictions on rare earth exports and Indonesia’s restrictions on nickel ore exports. The Chinese and Indonesian export restrictions went to WTO dispute settlement, but China lost at the Appellate Body and Indonesia’s appeal is stalled. The WTO disputes have confirmed that disguised export restrictions are unlikely to pass through the WTO’s general exceptions. However, the paralysis of the WTO Appellate Body left no realistic alternative. To prevent a domino effect of export restrictions on raw materials or necessary products, it will be necessary to explore medium- and long-term cooperation among countries that are affected by export restrictions, and in the short term, bring unjustified export restrictions to the WTO.

Export controls are measures that prohibit or restrict exports for security purposes, mainly military goods and dual-use items. In WTO disputes, they are recognized under the GATT Article 21 security exception. Prominent examples of export controls include the U.S. export controls on semiconductors to the People’s Republic of China in 2022 and the Chinese export controls on germanium and gallium in 2023. China requested WTO dispute consultations regarding the U.S.’ export controls, but the U.S. claimed a security exception and stated that the WTO panel did not have jurisdiction to hear the case. As the U.S. and China continue to compete for technological supremacy, it is likely that export control measures will continue to escalate. The United States imposes export controls to prevent China from acquiring advanced technologies that could be diverted for military purposes, citing security threats to its own security. Korea should actively work with the United States to ensure access to advanced semiconductor- related technologies. On the other hand, it is a noteworthy change that China is implementing export restrictions on critical raw materials in the form of export controls. The international community must work together to prevent the spread of arbitrary and unilateral export measures driven by the security logic of countries.

Economic sanctions are measures of pressure on countries that violate international law through trade restrictions. Under WTO agreements, economic sanctions can be justified through the GATT Article 21 security exception. Examples of economic sanctions that have gone through the WTO’s dispute settlement process include the United States’ Cuban Freedom and Democratic Solidarity Act and Russia’s restrictions on the passage of goods from Ukraine. The U.S. Cuban Freedom and Democratic Solidarity Act restricted EU sugar exports to Cuba, which was found to be in violation of Article 11 of the GATT, but the U.S. reached a political settlement with the EU and the case was closed without a definitive ruling in the WTO dispute settlement process. Russia’s restrictions on the transit of goods from Ukraine were found to violate Articles 5 and 10 of the GATT, but Russia was able to justify the measures before the panel by pointing to the economic sanctions it was facing at the time from the United States, the EU, and other countries as evidence that a security exception applied. Economic sanctions are a frequently used tool in the international community, but they can lead to conflicts with third parties or sanctioned states. To resolve these conflicts, sanctioning states tend to opt for political solutions rather than seeking legal judgment from the international community. In a world where national economies are increasingly interdependent due to the development of global supply chains, economic sanctions against other countries can negatively impact the trade of intermediate goods with third countries. Moreover, if the level of sanctions is high, there is a possibility that the sanctioned country will take countermeasures against the sanctions and justify them through GATT Article 21, as in the Russia-Transit case. Therefore, rather than implementing outright sanctions, a more desirable approach is to utilize alternatives such as “smart sanctions” that minimize the risk of human rights violations against the people of the sanctioned country and maximize the effectiveness of sanctions. In this regard, it is important for the Korean government to actively advocate for smart sanctions to the international community.

Chapter 4 empirically analyzes the impact of cross-border economic sanctions on global value chain participation. Export sanctions enforced from 1950 to 2022 were analyzed using GSDB data. The statistics related to global value chain participation are forward participation calculated through the world input-output table, and exports of consumer, intermediate, and capital goods, for which data were collected from linking WITS data with BEC codes.

The results show that cross-border export sanctions reduce the forward participation of the sanctioned country in the target country. In particular, exports of intermediate and capital goods are reduced, while exports of consumer goods and raw materials are not significantly affected. While sanctioned countries may seek to divert exports to third countries to offset the reduction in exports to the sanctioned country, as a case study, we analyzed the effect of export diversion in a sanctioned country that had implemented export sanctions against Russia in 2014 and found that the diversion of intermediate and capital goods exports to third countries also decreased. These results suggest that economic sanctions can cause economic losses to sanctioned countries.

We also find that U.S. sanctions generally have a negative impact on Korean exports of intermediate goods to sanctioned countries. As a case study, we examine the U.S. sanctions against China in the late 2010s and find that Korean exports of intermediate goods to China are diverted to third countries during the sanctions, with an increase in exports to the ASEAN region. In the case of consumer goods exports, we find that exports to third countries outside of China decreased, but exports to North America increased, offsetting the overall decrease. These results suggest that Korean firms may have responded to the difficulties in exporting intermediate goods to China by relocating their production bases to the ASEAN region or strengthening their trading relationships with ASEAN firms. This emphasizes the strategic importance of the ASEAN region in the formulation of Korea’s foreign economic policy.

Chapter 5 presents a theoretical model to analyze the rationality of U.S. and China’s export control policies. The model is not limited to the case of the United States and China, but provides a general framework for analysis that can be applied to other bilateral relations.

The U.S.-China technology rivalry is mutually exclusive in terms of security. U.S. exports of advanced technology to China enhance China’s military capabilities, posing a threat to U.S. security. On the other hand, for China, acquiring advanced technologies presents not only an economic benefit but also an opportunity to enhance its military capabilities. To reflect this reality, our model assumes that there are opposing externalities that arise from the export of high-tech items to both countries.

The security threat posed by U.S. exports to China can be viewed as an externality that arises from U.S. firms’ pursuit of profits. This is because firms may export advanced technologies for economic gain without considering the negative impact on their country’s national security. As a result, governments have an incentive to take measures such as export controls and enhanced outbound investment screening to limit corporate profiteering and protect national security.

Export controls on advanced semiconductor goods and technologies mean imposing the highest level of security taxes on exports of these items. As a result, advanced semiconductors and related services are produced in the U.S. mainland. On the other hand, the likelihood that the Chinese government would impose strong export restrictions on critical raw materials demanded in the semiconductor production process depends on the magnitude of the military benefits China derives from attracting U.S. companies to establish advanced semiconductor production facilities on its soil. If China does not see a significant military benefit to positioning U.S. advanced semiconductor production facilities on its soil, it may seek to secure economic benefits by simply exporting raw materials to advanced semiconductor production facilities on the U.S. mainland. However, if China has a significant military interest in attracting advanced semiconductor production facilities to its territory, it may be willing to enforce raw material export restrictions to attract U.S. companies.

Thus, if U.S. export control measures continue, the trigger for a break in the U.S.-China supply chain for advanced semiconductor production will paradoxically be the failure of China’s semiconductor rollout. If China’s semiconductor drive succeeds and China’s non- economic benefits from U.S. advanced semiconductor companies’ investments in China are not substantial, the Chinese government will have no incentive to maintain its raw material export control policies. This is in the same vein as the demise of export control policies in the late Industrial Revolution.

Our model also analyzes a scenario where the externalities generated by the export of high-tech goods are positive for both countries. In this case, the developed country does not consider export restrictions, while the developing country has an incentive to restrict raw material exports in order to enjoy the externalities from the developed country’s investment. This is similar to the case of Indonesia’s export restrictions on nickel ore.

The U.S. high-tech export controls will make it more difficult for U.S. high-tech companies to invest in China in the future. Korea should strengthen its export control management system to avoid being labeled as a conduit exporter of high-tech goods to China, and increase penalties for unlawful technology leaks that undermine national interests. It should also work with key commodity producers and seek cooperation with similarly situated advanced manufacturing nations for joint countermeasures and supply chain diversification to counter potential arbitrary export restrictions on raw materials by some countries. Ideally, but challengingly, the country will also need to actively participate in international efforts to stabilize the WTO system.

Chapter 6 summarizes the analysis in the preceding chapters and sets out the implications and policy recommendations derived from the analyses in each chapter.

This report analyzes the changes in China’s outbound direct investment (ODI) policies and approaches in response to the evolving external economic cooperation environment in China. By examining the shifts in China’s ODI strategies, the report also explores the impact of regional strategies and economic cooperation relationships during the transition from Hu Jintao’s second term to the Xi Jinping administration, using regional ODI data. Finally, based on the characteristics of China’s ODI, the report presents the risks and suggested responses for South Korea.

In Chapter 2, we examined the changes in China’s ODI strategy. China’s ODI is closely related to its reform and opening-up policy. Since the reform and opening-up policy, China has pursued the simplification of regulations and the easing of restrictions on ODI. During the second term of the Hu Jintao administration, the ODI system encouraged overseas expansion, including by private enterprises, and witnessed significant regulatory simplification. The approval process shifted from a stringent examination system to an approval system, and there was a decentralization of government authority from the central government to local governments, which contributed to the easing of FDI regulations.

During the first term of Xi Jinping administration(2013-2017), China’s ODI began to experience rapid growth in scale and expansion of investment scope across various industries. The broadening scope of China’s ODI is attributed to the sustained effects of regulatory relaxation and the implementation of China’s new economic cooperation strategy, the ‘Belt and Road Initiative(一带一路).’ Since the beginning of the second term of Xi Jinping administration in 2018, amidst escalating tensions with the United States, Western countries have initiated measures to counter China’s influence. In response, China has strategically used economic development initiatives to interpret ODI as a supportive method of national development strategies. Emphasizing goals such as stabilizing supply chains, enhancing global corporate capabilities, entering emerging markets, and advancing the Belt and Road Initiative, China pursued an ODI strategy. There was a notable decline in M&A activity in the technology sector, which had previously been subject to strict regulations in developed countries. Meanwhile, there was a gradual expansion of greenfield investment in developing countries, which offer favorable conditions for market entry and resource acquisition.

From the second term of Hu Jintao to the second term of Xi Jinping administration, China’s ODI policies significantly influenced China’s actual OID. During this period, China consistently relaxed administrative regulations on ODI, while simultaneously increasing the level of management over investment areas. As a result, from the first term to the second term of Xi Jinping administration, China’s ODI rapidly expanded in scale. In addition China’s intention to position ODI as a supportinvemethod for national development was gradually manifested, as the country’s national economic development strategy became more defined.

Chapters 3 to 5 of this study analyze China’s ODI strategies in key regions are analyzed. The analysis covers the period from the second term of the Hu Jintao administration to the second term of the Xi Jinping administration, based on chronological, enterprise-type, investment-type, and sector.

Chapter 3 analyzes China’s investment strategy and current status in the United States and the European Union. China’s ODI in the U.S. and the EU has three main characteristics. First, regulations focused on advanced countries have affected China’s overseas expansion. Particularly, the Trump administration’s tightened regulations on China’s investment in advanced technology sectors since 2017 have led to a decline in M&A investment. Similar regulatory trends have been observed in the EU region, resulting in a decline in China’s investment in the EU. Second, there has been a shift from state-owned enterprises to private companies and a transition from brownfield to greenfield investments. The change in investment subjects became evident during the transition from Hu Jintao’s second term to the Xi Jinping administration, with a gradual increase in overseas investment by private enterprises. While brownfield M&A investments were prevalent in the earlier period, there was a shift toward greenfield investments due to changes in the M&A investment environment during Xi Jinping administration. Third, the motives and key investment sectors of China’s outboundinvestments have changed over different periods. During Hu Jintao’s second term, investment in the U.S. and the EU focused on the energy sector. In Xi Jinping’s first term, investment focused on real estate, finance, transportation, and technology. In Xi Jinping’s second term, there was a greater emphasis on investment in the transportation and logistics sector. These changes are interpreted as reflecting shifts in China’s investment motives due to policy changes by the Chinese government.

Chapter 4 investigates China’s ODI strategies and current status of China, focusing on the ASEAN and the Middle East regions since the second term of the Hu Jintao administration. China’s ODI in Asia has been characterized by close cooperation between the Chinese government and the target countries. Factors such as the level of economic cooperation, U.S.-China strategic competition, the Belt and Road Initiative, resource acquisition, market expansion, and the demand for new cooperation related to green and digital transformation have influenced China’s strategies. Over different periods, there have been changes in the key investment regions and countries, as well as the objectives and directions of investment. Particularly, since the beginning of the Xi Jinping administration, China’s investments in Asia has emphasized the integration of the Belt and Road Initiative and ODI. The Xi Jinping government actively promotes the overseas expansion of Chinese companies based on the Belt and Road Initiative, highlighting the coordination of Belt and Road projects with investments in the ASEAN and the Middle East regions. The Chinese government actively uses ODI in developing countries as a means of external promotion of the Belt and Road Initiative and facilitating the overseas expansion of Chinese companies. It is necessary to monitor China’s overseas investment trends, by recognizing that China is increasing investment cooperation with the ASEAN and the Middle East not only from a political and diplomatic perspective but also for economic security, pursuit of national interests, and the promotion of new growth industries.

Chapter 5 examines China’s ODI in Africa and Central and Latin America. In these regions, China has focused its investments primarily on the energy and metals & mineral sectors, a trend that can be linked to the Chinese government’s main goal of securing raw materials. The most significant investments have taken place since the Hu Jintao administration. However, during the Xi Jinping era, with the announcement of the Belt and Road Initiative, China has expanded its investments not only in energy and metals & mineral sectors but also in transportation, logistics and agriculture. China has actively engaged in economic cooperation and diversified investment in various sectors through forums such as the China-Africa Forum and the China-CELAC Forum, enhancing economic collaboration through consultations with each region. China’s ODI has significantly increased in Africa and Latin America, in part because these countries have actively sought foreign investment for their own infrastructure improvement and economic growth, which was in line with the objectives of Chinese investment. However, a change in the pattern of China’s ODI can be observed after the announcement of the Belt and Road Initiative in 2013. Following the Belt and Road Initiative, China actively cooperated with developing countries to develop supply chains and increased investment in Africa and Latin America.

Based on the previous analysis, this study proposes three policy recommendations, including △strengthening government cooperation channels for ODI △creating momentum for ODI in emerging markets such as green and digital sectors △strategically expanding policy initiatives for Korea-China cooperation in third countries.

First, China adopts a strategy to promote ODI by providing incentives through policies encouraging companies to expand abroad domestically. Externally, it adopts a strategy to facilitate companies’ overseas expansion by utilizing various channels of intergovernmental agreements and foster an environment of economic cooperation. This includes using government agreements to build regional cooperation through bilateral government communication channels, and multilateral cooperation bodies such as BRICS and BRI. China has consistently applied this strategy of promoting ODI through government agreements until the second term of Xi Jinping administration. This is seen as an effective strategy to address new concepts of economic security and uncertainties in the international community, such as supply chain blockage. South Korea has also adopted a similar approach in the Middle East through its “One Team Korea” strategy, which coordinates ODI through government-to-government agreements. Given the growing importance of ODI in developing countries, especially in resources and emerging industries sectors, and heightened national security concerns, there is a need for joint responses from government and business. Therefore, it is crucial for South Korea to actively consider engaging in government-to- government discussions through bilateral and multilateral summits with strategically important regions. At the same time, the use of business forums should also be thoroughly explored.

Second, during the Xi Jinping administration, China has begun to strengthen the link between ODI and the national development strategy. In particular, given the increasing importanceof climate change mitigationand digital economic growth for future national competitiveness, there is a concentrated effort on ODI strategies in emerging areas such as green and digital sectors. This focus was also underscored during the high-level forums of the Belt and Road Initiative (BRI) in October 2023 as well. It is noteworthy that the strategic industries selectedby China for new ODI momentum are also critical for South Korea. As emerging industries gain prominence, securing markets becomes closely linked to a nation’s overseas production capabilities. Especially in regions such as Latin America, Africa, and the Middle East, where developing countries are focusing on resources and emerging industries, various forms of support are crucial for South Korean companies to enhance competitiveness and secure comparative advantages.

Third, there is a strategic need to expand South Korea-China cooperation in third countries. South Korea’s ODIand China’s ODI overlap significantly. China strategically defines minerals, energy, and advanced technology as key resources and invests heavily in green and digital sectors. Competitive dynamics between South Korea and China are already emerging, especially in intermediate goods production. While this may be a constraint on South Korean companies’ ODI, it should be strategically leveraged as a new opportunity. South Korea has a history of joint investment with China in third countries, particularly in energy, utilities, and infrastructure. Building on this foundation, there is a need to strengthen strategic cooperation in new areas, including strategic industries for both countries.

South Korea faces a dilemma between responding to an invitation from a climate club advocating for rapid carbon reduction and addressing the domestic burden of decarbonization, rooted in its carbon emission-intensive industrial structure. The Korean government must strike a balance between the goals of achieving climate neutrality and sustaining economic growth. These two issues represent a kind of Gordian knot, notoriously difficult to untangle. Yet, the reality is stark, and the urgency of the climate crisis is undeniable. In this context, this paper aims to introduce the theory of the climate club. Utilizing this framework, we examine the G7-initiated climate club and the GSSA as real-world case studies.

In chapter 2, we analyze the global carbon reduction effort by examining investment data from the International Energy Agency (IEA) and FDI markets to analyze the investment patterns in the climate and environmental sectors at both government and private firm levels. This reveals a disparity between inward and outward investment patterns. We also observe that the main destination for investment is renewable energy, yet capital flow into fossil fuels remains substantial. This reflects the varied levels of NDC (Nationally Determined Contributions) achievements between the G7 and developing countries, which amplifies concerns over carbon leakage and the issue of competitiveness in developed countries. Based on these findings, we recognize the increasing number of new initiatives concerning climate change. Among them, due to their inclusiveness and comprehensiveness, the IDA, IFCMA, IDDA, Breakthrough Agenda, FMC, JETP are particularly noteworthy.

Chapter 3 identifies the issues surrounding climate clubs through the case studies of the G7-led climate club and the US-EU-led Sustainable Steel and Aluminum Agreement currently under negotiation. The G7 climate club aims to be open, cooperative, and inclusive, supporting the efficient implementation of the Paris Agreement and its subsequent decisions. The activities of the Climate Club are structured around three pillars: Pillar I focuses on leading transparent and ambitious policies for achieving carbon neutrality; Pillar II is concerned with industrial transition; and Pillar III strengthens climate cooperation and partnerships. The climate club is scheduled to officially launch at the United Nations Climate Change Conference (COP28) in 2023.

Negotiations for the GSSA are distinguished by several points: the United States is proposing punitive tariffs on certain steel and aluminum imports; the goals extend beyond climate objectives to include resolving steel and aluminum trade disputes, addressing global overcapacity, and resolving mutual concerns regarding the EU’s Carbon Border Adjustment Mechanism (CBAM) and the United States’ Inflation Reduction Act (IRA). The United States hopes to link the potential imposition of punitive tariffs with membership in the GSSA. On the other hand, the EU is opposed to imposing punitive tariffs and suggests that, as long as it is in accordance with international law, GSSA member countries should be granted full discretion to adopt and implement their own climate policies based on international cooperation on climate and trade. The EU also proposes introducing ‘permitted’ environmental subsidies that would not allow the imposition of countervailing duties by GSSA members.

Although the discussions around these two climate clubs are developing in different ways, they both presuppose the acceleration of carbon neutrality in greenhouse gas-intensive industries. Moreover, while it is theoretically possible to link climate decarbonization and trade issues within a single agreement, the current negotiations for the G7 initiative and GSSA show that dealing with such issues in practice is an exceedingly difficult task. In the G7 climate club, as the membership expands, issues initially discussed, such as carbon pricing and CBAM, have disappeared from the negotiation table. The GSSA is showing limitations in terms of effectiveness, as long as significant greenhouse gas emitters do not join the GSSA.

In Chapter 4, we analyze the economic utility of each country according to the participation incentive structure that determines the stability of a climate club, using a computable general equilibrium model. Building on previous research, we identified the dilemmas inherent in international-level climate cooperation bodies and reviewed various solutions to these dilemmas. In a situation where only small, stable climate clubs or large, inefficient climate clubs can emerge according to theoretical models, this study explains the increasing dilemmas faced by the proliferating real-world climate clubs. It also analyzes the differences in the effects of cooperation depending on its form through counterfactual analysis. Additionally, by conducting a simulation analysis of China’s role in climate trade cooperation, we have determined that the role of major countries, especially China, is critical for climate clubs to effectively contribute to achieving carbon neutrality. The findings of Chapter 4 suggest that, under the constraints of legalized carbon neutrality targets of key countries, cooperation is needed to reduce the costs of carbon emission reduction. Ultimately, this implies that investment in the renewable energy sector and the sharing of its outcomes will be essential.

Chapter 5 analyzes the opportunities and challenges that our industries will face with the emergence of climate clubs. This analysis was conducted through industrial statistical surveys and in-depth interviews with experts from selected industries, which include steel and cement due to their rapid advancement in decarbonization discussions, as well as the chemical industry, which is highly dependent on trade and has a high carbon intensity.

For the steel industry, joining a climate club is viewed positively due to the potential for leading standards, supply chain cooperation, and possible exemptions from the Carbon Border Adjustment Mechanism (CBAM). Concerns include increased pressure to enhance Nationally Determined Contributions (NDCs) targets and stricter carbon regulations. Issues raised by the steel industry involve worries about decarbonization pressures, weakened competitiveness in green markets for blast furnace steel producers, conversion concerns related to CBAM, insufficient green energy infrastructure, and a scarcity of steel scrap. Policy recommendations stress the importance of early involvement in setting international standards to reflect domestic perspectives, especially regarding carbon emission calculations for different production methods and discussing prohibition of export restrictions on necessary steel scrap among climate club members. An urgent need for the steel industry is expanded government support for electric arc furnace introduction and hydrogen-based steelmaking.

The cement industry suggests that climate club standard development should account for the characteristics of each country and proposes the establishment of a council to discuss the safety of cement. Despite the high proportion of process emissions making greenhouse gas reduction challenging, there is a need for domestic policy improvements. This includes revising the domestic cement production structure centered on Portland cement, and establishing standards for blended cement that emits less carbon.

The petrochemical industry in Korea has reached its limit for emission efficiency within the current energy infrastructure and advocates for paced discussions on low-carbon transitions in climate clubs. The industry emphasizes the need for development and stable supply chains for alternative raw materials like bio-naphtha. It calls for an overhaul of the domestic emissions trading system to secure emission rights and contribute to the NDC.

The plastic industry is not directly targeted by direct emission regulations or carbon border adjustment mechanisms, hence they view joining a climate club positively as it could lead to the adoption of international standards and best operational practices. The plastic industry looks forward to an improvement in domestic recycling policies to align with international standards, by participating in climate clubs and benchmarking foreign exemplary cases. Overall, Chapter 5 highlights that the advent of climate clubs presents both opportunities and challenges for those industries, with the need for domestic industries to adapt to international standards and decarbonization goals while advocating for supportive policies and innovations to maintain competitiveness.

In conclusion, Chapter 6 synthesizes the preceding analysis to articulate a cohesive set of principles, strategic directions, and policy recommendations for South Korea’s engagement in climate club negotiations aimed at carbon neutrality. Our policy blueprint extends beyond the confines of the G7 climate club and GSSA, encompassing a broader vision for climate and trade cooperation across multiple countries.

Principles and Strategic Directions for Climate Club Negotiations: 1. WTO-Coherent Climate Trade Framework: Advocate for a climate trade policy that aligns with existing WTO regulations to ensure a fair and level playing field. 2. Collaborative Climate Club Dialogues: Foster climate club discussions grounded in shared efforts for cost-effective carbon mitigation, shifting the focus from competitive dynamics to collective action. 3. Support for Transitioning Regions and Industries: Increase support mechanisms for regions and industries most impacted by the shift towards green energy, facilitating a just and equitable transition. 4. Multilateral Cooperation Against Green Protectionism: Utilize climate clubs as platforms for multilateral collaboration to counter green protectionism and safeguard economic security within the international marketplace. 5. Balanced Climate and Trade Objectives: Ensure that climate club deliberations simultaneously advance carbon neutrality and uphold the integrity of global trade, avoiding distortive effects.

Policy Cooperation Pathways within Climate Clubs: To catalyze technological advancement and expedite the transition to a low-carbon economy, we propose: Prioritization and Investment in Climate Technologies: Channel investments into high-priority climate technologies. Collaboration on Technical Standards: Work in concert with international partners to develop and harmonize technical standards for new technologies. Creation of Climate Tech Markets: Stimulate markets for products incorporating climate technology and enhance the attractiveness for private investments. Global Low-Carbon Supply Chains: Construct robust supply chains that support the distribution of low-carbon products globally. Standardization and Dissemination of Technologies: Promote the standardization of low-carbon technologies and facilitate their broad dissemination.

Focal Points for Climate Club Cooperation: Foster cooperation in standard certification processes. Engage actively in the delineation of clean hydrogen standards. Collaborate on investment initiatives that accelerate the transformation of production processes to low-carbon models. Emphasize the pivotal role of digital technologies in achieving carbon neutrality.

Trade Policy Considerations: Introducing a system of permissible subsidies to mitigate trade conflicts. Ensuring stability in the supply chains for achieving carbon neutrality. Encouraging broader participation in climate-related initiatives. Crafting a Korea-centric climate club strategy that aligns with our national interests, enhancing economic security, and effectively navigating global trade complexities. The policies and strategies delineated herein are designed to position Korea at the vanguard of international climate policy, driving forward the global agenda toward a sustainable and prosperous low-carbon future.