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A Study on Korea’s Cooperation Strategy along with the Sustainable Development Goals: Focusing on the Trade and Climate Change Policy Coherence economic development, economic cooperation

Author KWON Yul, JUNG Jione, HUR Yoon Sun, JEONG Jisun, and LEE Ju Young Series 16-13 Language Korean Date 2016.12.30

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  In September 2015, the United Nation’s member states agreed on the Sustainable Development Goals (SDGs) as part of the 2030 Agenda for Sustainable Development, a resolution adopted by the General Assembly on its 70th session. Building on the achievement of the Millenium Development Goals and seeking to address emerging challenges, the SDGs are a set of comprehensive and ambitious development goals for the next 15 years and a universal call to end poverty, protect the planet and ensure all people enjoy peace and prosperity. The 17 SDGs and 169 targets are integrated, inter-connected and balance the three dimensions (economic, social and environment) of sustainable development. The implementation of 17 integrated goals and 169 targets requires whole-of-government approaches, enhanced coordination among divergent actors. The SDG target 17.14 specifically calls on all countries to “enhance policy coherence for sustainable development (PCSD)” as an integral part of the means of implementation. In the context of SDGs, it is emphasized to capitalize on synergies between goals, targets and different sectoral polices. The PCSD is highlighted as a policy tool to manage inconsistencies among policy areas such as aid, trade and climate change and subsequently enhance development effectiveness and enable the environment for sustainable development.
  Under the circumstances, it is important for donor countries to understand the potential impact of “beyond-aid” schemes in trade and climate change, in particular. While it is widely agreed that trade is crucial for economic growth and sustainable development, a large number of low income countries, the Least Developed Countries in particular, remain marginalized in global trade. Tariff and non-tariff barriers to developing countries create negative spill-over effects on the livelihood of poor farmers in developing countries. Another policy area of particular importance is climate change. The Paris Agreement at COP21 marks a decisive turning point in the global response to climate change. In the new climate regime, it is imperative for donor countries to help developing countries strengthen their climate resilience and adaptive capacity while attempting to reduce greenhouse gas emissions. 
  South Korea, as an emerging donor, has made a continuous effort to enhance its aid effectiveness by improving the linkage between technical and financial cooperation and engaging the private sector in development in priority countries. Nevertheless, there has been a lack of policy coherence in terms of aid, trade and climate change polices, which can have a significant potential synergy and sometimes negative effects on the developing countries.
  In this context, the study attempts to explore possible ways to enhance development effectiveness and policy coherence in the area of aid, trade and climate change from the perspective of the Republic of Korea. The study begins by briefly introducing the SDGs and moves on to analyze the goals, targets and indicators that are specifically related to trade and market access as well as climate change. This is followed by an illustration of changes in the concept of policy coherence in the context of MDGs and then the SDGs. The Commitment to Development Index by the Center for Global Development is depicted as a tool to measure and compare the performance of 27 rich countries in policy coherence in the areas of aid, trade, finance, migration, environment, security and technology. The transition from PCD to PCSD (Policy Coherence for Sustainable Development) is discussed, followed by an overview of the PCSD analytical framework proposed by the OECD.
  The next chapter attempts to reveal the joint effect of aid and Generalized Scheme of Preferences (GSP) on the export from recipient countries. The results of a gravity model show that the joint effects of aid and GSP on exports vary according to the income level of the recipient country and the industry. Especially, it was found that aid and GSP have positive joint effects on the agricultural export of low income countries. The result is consistent with former literatures indicating that GSP does not work alone but has a positive effect on trade when provided together with aid. This paper conducted a scenario analysis for Korea’s introduction of the GSP. The results of a partial equilibrium analysis indicate that the introduction of Korea’s GSP will increase imports in agriculture, textiles and mineral products. However, damage to the domestic industry would be limited since the volume of increased import from developing countries is relatively small. There are also provision tools such as rule of origins and import restriction that are widely adopted by other donor countries to protect their domestic industries.  
  The following chapter analyzes the key issues in the Paris Agreement adopted in the same year as the SDGs and identifies five priority areas to pay particular attention in order to achieve the SDGs, as follows: first, increase the volume of climate-related aid; second, mobilize private resources with public resources and public sector intervention using various financial instruments; third, mainstream climate change into decision-making processes; fourth, promote climate-related technology transfer; fifth, prepare for international carbon pricing scheme and way of cooperate with developing countries. 
  Finally, the paper concludes by suggesting policy recommendations for the Korean government to enhance policy coherence for sustainable development, specifically in the areas of aid, trade  and climate change policy. Firstly, it is argued that the government needs to enhance policy coherence by aligning its national strategies with the SDGs and applying integrated policy approaches. Since the adoption of the SDGs, an increasing number of countries have made efforts to “nationalize” the 2030 agenda and acclimate it to their national context and priorities. In order to promote policy coherence for sustainable development, the government needs to set up an institutional setting and co-ordination mechanism for SDG implementation. However in South Korea, there is an absence of an oversight unit for SDG implementation, which is crucial to ensure a whole-of-government approach and coordinated planning. The recently adopted Mid-term ODA Policy for 2016-2020 briefly mentions the importance of policy coherence in the SDG context without providing a detailed implementation plan. There should be clearly stated high-level commitment to PCSD supported by time-bound action plans with shared objectives across the whole government. There must also be clear mandates for relevant ministries and agencies to balance and coordinate divergent and sometimes conflicting policy interests. Most of all, the policy coherence across policy areas such as aid, trade and climate change must be integrated into the national legal framework, namely the Sustainable Development Act and the Framework Act on International Development Cooperation, to ensure the compliance of the relevant actors. To implement the PCSD agenda, the inter-linkages and potential trade-offs between various policies, goals and targets should be analyzed and identified through whole-of government approaches. Based on the analysis, the common area for action must be determined and implemented by an inter-ministerial committee.
  In order to track progress on PCSD, a set of indicators aligned with Korea’s national context must be developed by modifying standard PCSD indicators by the OECD into a form that can incorporate the expertise of government think tanks and the civil society. Using the existing mechanism, the Sub-Committee for Evaluation under the Committee for International Development Cooperation could play a key role in developing and coordinating the PCSD monitoring and reporting system. Furthermore, in order to promote an integrated approach to mainstream SDGs in various policy areas, the government could consider setting up an inter- ministerial committee responsible for the implementation of SDGs.
  Secondly, the study argues that the introduction of GSP should be considered to enhance development effectiveness. As was revealed in the empirical analysis, aid and GSP have a positive joint effect on the exports from developing countries. In addition, GSP could be considered as another supporting mechanism along with aid to expand trade and investment with developing countries. As we reviewed in this study, other donors have been diversifying their support tools for developing countries. Along with aid, FDI and GSP strengthen the local production and export facilities in developing countries. Given the constraints of the aid budget in Korea, GSP could be effective for the expansion of trade and investment with developing countries by improving the local production facilities. Such measures would help to enhance the investment and employment in developing countries, and ultimately will contribute to enhancing the development effectiveness and mutual growth with developing countries. The expected damage resulting from the introduction of the GSP to the Korean domestic industry will be limited according to our scenario analysis. If any, provision tools such as rule of origins and import restriction could be established together with the GSP to protect domestic industries. Also, the recent increase of reciprocal trade agreements with developing countries, such as the Korea-ASEAN FTA, is expected to curb any damages from the GSP to domestic industries.
  Thirdly, the linkage between climate change policies and aid policies must be enhanced. In the context of a paradigm shift toward low-carbon societies, climate change must be mainstreamed throughout the decision-making process of development policy and at the implementation level. Finally, all development activities need to help developing countries to prepare a low-emission and climate-resilient development path while meeting the needs and priorities of domestic actors.
 

 

 

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