This report examines recent EU industrial and trade policy in relation to Net-Zero strategic technologies and analyzes their impact on the global supply chains. The introduction section places the recent return of industrial policy in historical context and emphasizes the importance of EU policies as a major player in global supply chains. Against this background, this report introduces the recent status of EU policies in Chapter 2, analyzes and compares supply chains of Net-Zero strategic industries in Korea and the EU in Chapter 3, conducts an empirical analysis of policy effects in Chapter 4, and finally draws implications for Korea in Chapter 5.

Chapter 2 introduces the EU's industrial and trade policies related to Net-Zero strategic technologies and compares them with those pursued in major countries. As the EU seeks to transform its entire socio-economic structure to achieve climate neutrality by 2050, it is seeking to strengthen the competitiveness of related industries within the EU while reducing offshore dependence through the Green Deal Industrial Plan. To this end, the government has put forward policies to (1) foster domestic companies such as the Net-Zero Industry Act (NZIA), Critical Raw Materials Act, and temporary subsidy deregulation, and (2) regulate overseas supply chains such as the Carbon Border Adjustment Mechanism, Foreign Subsidy Regulation, and Corporate Sustainability Due Diligence Directive. Among these, the Net-Zero Industry Act designated Net-Zero strategic technologies in 19 fields, including renewable energy, batteries, hydrogen, and carbon capture, and set local production targets for designated technologies. To achieve this, it provides support measures such as simplifying regulations, creating industry clusters, and fostering human resources. Also, regulating policies require companies to meet the EU’s environmental, labor, human rights, and competition standards before they can trade or partner with EU companies. Similar policies are in place in other major countries around the world, including the United States, China, and Japan, making the measures to combat climate change a trade barrier for other countries.

Chapter 3 then analyzes import and export data by production stage to compare the current status of supply chains in the EU and Korea. We selected 499 items directly or indirectly related to the EU’s Net-Zero strategic technologies and analyzed the overall status of imports and exports, export competitiveness, and import supply chains for each item. While the EU remains competitive in the capital goods sector, it is highly dependent on raw materials and intermediate goods, and the shift in dependence from other countries to China over the past decade has been pronounced. Korea’s supply chain of climate-neutral strategic technology imports is also highly dependent on China, which exposes supply chain vulnerabilities. In particular, the concentration of imports in intermediate and capital goods is getting worse, and the dependence on China for key raw materials for batteries is very high. For both the EU and South Korea, reducing import dependence on specific countries for climate-neutral strategic technologies has emerged as a key challenge.

Chapter 4 utilizes a gravity model to identify the impact of EU policies on bilateral imports and exports of climate neutral strategic technologies. Due to data limitations, the analysis is limited to the period from 2008 to 2021 and does not include the effects of the more recent policies reviewed in Chapter 2. Nevertheless, the results show that the EU’s subsidies, import and export controls, trade defense measures, and government procurement regulations promote intra- EU trade and reduce extra-EU trade. This effect is particularly pronounced in ICT and strategic industries. The above analysis suggests that the EU’s upcoming climate neutrality policies are likely to strengthen intra-EU trade and weaken extra-EU trade. This means that South Korea, a country outside the EU, could also be affected by the EU’s climate neutrality policy.

Finally, Chapter 5 draws policy implications based on the above analysis. While developing countermeasures to minimize the impact of major countries’ industrial and trade policies on the Korean economy, Korea should select and focus on key domestic industries to maintain competitiveness in the global market. In addition, Korea should take full advantage of cooperation opportunities with like-minded countries to build stable supply chains. Specifically, the report suggests policy alternatives such as (1) establishing a control tower led by the Prime Minister to establish an inter-ministerial coordination system; (2) establishing a high-level industrial and trade strategy that encompasses core industries, trade policies, and supply chains; (3) setting targets for local production and diversification of domestic companies and providing support policies; (4) establishing policies for training and exchanging experts in the strategic industry; and (5) cooperating with international allies through bilateral channels. As a mid-sized country, Korea needs both insight into the big picture of global economic flows and wisdom in formulating detailed policies to maintain stable economic growth. We hope that this report will be utilized as a reference for the development of Korean industrial policies.

Both North and South Korea have long maintained the “One Korea Policy.” Under the Inter-Korean Basic Agreement signed in 1991, inter-Korean relations were defined as a “special interim relationship” tentatively formed during the process of unification, rather than state-to-state relations. North Korea appeared to show a stronger inclination for the “One Korea Policy” even with regard to its terminology, with its usage of phrases like “Pyongyang leaders’ reunion” and “North-South top leadership meeting” to refer to the Inter-Korean Summits.

However, in late 2023, North Korea began re-framing inter-Korean ties as relations between “two belligerent states.” The North went as far as declaring South Korea a “thoroughly foreign entity” and “primary foe,” even hinting at the possibility of nuclear war. It has prohibited the North Korean populace from using expressions like “unification” and “kinship” in their daily lives, even amending its Constitution to clearly designate the ROK as a “hostile state.”

The “two Koreas” rhetoric marks a profound shift from North Korea’s perception over the past eight decades and could fundamentally reshape the basis of inter-Korean relations. It is, therefore, essential to examine the key elements of the North’s “two Koreas” assertion, understand its underlying motives, and discuss the implications for Korean unification Equally important is the need to explore strategies to effectively promote a unification policy aligned with the perceptions of the four major powers involved in Korean Peninsula affairs.

In this study, Chapter II traces the evolution of the unification policy of the Republic of Korea, offering insights into the policies of the 1950s and 1960s spanning the Rhee Syngman, Chang Myon, and early years of the Park Chung-hee governments; as well as policies of the 1970s and 1980s, encompassing the latter years of the Park Chung-hee government and the Chun Doo-hwan and Roh Tae-woo governments. It details the core philosophy, principles, and unification processes envisioned in the “National Community Unification Formula” announced in 1994 under then President Kim Young-sam’s leadership. The chapter then outlines the unification policies of the Kim Dae-jung government, which continued the tradition of the “National Community Unification Formula,” and each subsequent government up to the Yoon Suk-yeol government.

Chapter III provides a critical examination of North Korea’s approach to unification, beginning with the construction and development of a nationalist narrative and the symbolic emphasis on “kinship” and “nation.” This chapter reviews North Korea’s unification strategies, from the “democratic base theory” of the 1950s, which advocated for armed unification, to its later proposal of a “low stage federation” in the 2000s.

Chapter IV addresses North Korea’s recent adoption of the “two Koreas policy” and its consequences for Korean unification. North Korea had foreshadowed this shift even before explicitly asserting the “two Koreas policy” in late 2023. Signs included proposals for a “federal union system” (2014), the introduction of Pyongyang Standard Time (2015), the launch of the “Our State-First Principle” (2017-2021), revisions in the nationalistic phrase “Kim Il-sung’s nation, Kim Jong-il’s homeland” to “Kim Il-sung and Kim Jong-il’s homeland” (since 2019), the regime’s re-orientation toward a “two-state policy” during the 8th Party Congress (2021-2022), and the use of “Republic of Korea” in official statements from North Korea’s Ministry of Foreign Affairs (2023). The study argues that North Korea’s push for the “two Koreas policy” reflects several key motivations: an ever deepening sense of siege mentality due to strengthened US, ROK, and Japan trilateral cooperation; disillusionment with the ROK government; resistance to unification through absorption; and concerns about internal stability. It also reflects a desire to reshape the North Korean national identity by eliminating notions of “kinship,” as well as the need to consolidate Kim Jong-un’s leadership. The chapter also discusses interpretations of this policy as either a tactical maneuver or a strategic shift and concludes that accepting the “two Koreas policy” is not only unnecessary, but that rejecting it would be significantly more advantageous.

Chapter V examines the perspectives and assessments of the four major powers—the US, Japan, China, and Russia—on the unification of the Korean Peninsula. Specifically, it analyzes official statements from the leaders of these countries, spanning from the Kim Young-sam to Moon Jae-in governments, evaluating each nation’s stance on unification.

Chapter VI re-evaluates the “National Community Unification Plan” and discusses strategies for garnering effective support from neighboring stakeholders. The “National Community Unification Plan” is significant for its vision of a gradual, phased unification process and for highlighting a “national community” based on national consensus. However, the plan faces limitations, such as difficulty adapting to the changing domestic and international situation, ambiguity in the stages it laid out, and a lack of concrete implementation strategies. The “August 15 Unification Doctrine” announced on August 15, 2024, marks a progressive advancement of the plan. It is commendable for its emphasis on universal values, focus on the North Korean populace over the regime, proactive international engagement, and specific action plans. Nonetheless, further refinement is needed, including steps to encourage North Korea’s engagement, assuage concerns over absorption-based unification, increase practical viability of implementation plans, and actively seek international solidarity. A review of past policy outreach revealed that promotional activities have largely been tied to the state of inter-Korean affairs, and have been generally one-dimensional, focusing on unidirectional information dissemination and targeting government authorities, experts, and overseas Koreans. To enhance support from neighboring stakeholders, it would be beneficial to conceptualize unification as a goal that transcends inter-Korean relations; transition from one-directional messaging to multidimensional, interactive approaches that promote active cooperation; and broaden the target audience from a select few to a more diverse and widespread audience.

Economic cooperation between the Gulf region (Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, Kuwait, and Oman) and major Asian countries (such as South Korea, China, Japan, and India) has been primarily centered around energy supply chains. With the rise in international oil prices after the oil shock, a large-scale infrastructure construction market has also developed, leading to active collaboration in infrastructure projects between two regions. However, since the early 2010s, the era of low oil prices has prompted a significant push for economic diversification within the Gulf region, resulting in the announcement of national development strategies such as Saudi Vision 2030, UAE Centennial 2071, and Qatar National Vision 2030.

Given the lack of industrial foundations outside the energy sector, Gulf countries have recognized that external collaboration is essential for fostering manufacturing industries. They have been strengthening ties with major Asian countries to adopt industrial development models and to adopt new technology. Particularly after President Obama’s inauguration, Washington shifted its foreign strategy focus from the Middle East to the Indo-Pacific, reducing its involvement in conflicts in the Middle East. Consequently, Gulf countries have expanded cooperation with Asia to lower their dependence on economic collaboration with the U.S. and Europe. This shift has led to the emergence of policies prioritizing Asia, indicating that the relationship between the Gulf and Asia is expected to deepen further.

This study begins with the question of whether there is a policy prioritizing Asia in the Gulf region, in light of the geopolitical changes surrounding the Gulf and the shifts in the foreign cooperation strategies of Gulf countries. It aims to explore the driving factors behind the cooperation between major Gulf countries (Saudi Arabia, UAE) and major Asian countries (South Korea, China, Japan, India), as well as to examine whether there are differences in their cooperation strategies. By addressing these questions, the study seeks to elucidate the implications for South Korea’s cooperation with the Gulf region. The research focuses on energy and advanced industries, centering on the aforementioned major Gulf and Asian countries.

Chapter 2 examines the background behind the emergence of the concept of the “Asia-centric strategy of the Gulf” and the trends in Gulf-Asia cooperation. The concept of an Asia-centric strategy among Gulf countries has arisen due to three main factors: 1) the necessity for Gulf countries to diversify their economies away from being oil-dependent, 2) the need to strengthen partnerships with major Asian countries (South Korea, China, Japan, India) that have achieved rapid industrial development, and 3) the rise of China and Russia amid changes in the geopolitical landscape surrounding the Middle East. As these internal and external environmental changes have been recognized, cooperation between the Gulf region and Asia has expanded. Notably, since the 2010s, Saudi Arabia has increased its diplomatic cooperation with Asia, moving toward a regional balance away from a one-sided diplomatic focus on the U.S. and Europe. In terms of economic cooperation, trade volumes between the Gulf and Asia, particularly with China, have increased, and investments in Asia led by sovereign wealth funds have been on the rise.

This study suggests that rather than explicitly advocating for an Asia-centric policy, Gulf countries have strengthened economic cooperation with Asian countries that have developed industries aligned with their own industrial needs (particularly in energy, advanced industries, and technology), resulting in a perception of prioritizing Asia. Additionally, while it is true that the share of cooperation with Asia has increased in the political and diplomatic context, it can be argued that a diplomatic strategy closer to an Asia-balancing policy has emerged as regional balance has been sought.

Chapter 3 analyzes the demand for Gulf-Asia cooperation. The Gulf region has traditionally been the most developed area for the energy industry, and since major Asian countries are key energy buyers from the Gulf, it is crucial for Gulf countries to maintain partnerships with Asian nations to secure stable exports of oil and natural gas. However, recent developments, such as new demands arising in the energy sector—like the development of gas fields, diversification of energy production through an increase in renewable energy, and the promotion of the petrochemical industry—have led to an increased demand for cooperation between Gulf countries and Asia. Moreover, countries like Saudi Arabia, the UAE, and Oman are leveraging their favorable hydrogen production sites to invest in hydrogen development, aiming to secure stable export markets with Asian nations that have high demand for hydrogen.

From the perspective of advanced technology and industry, Gulf countries have announced strategies to foster industries such as AI, digital transformation, and advanced mobility as part of their economic diversification efforts. Notably, the UAE is leading in the AI sector within the Gulf region, and the Saudi government has committed to significant investments in AI, resulting in competition between Saudi Arabia and the UAE for leadership in this field. In this process, Gulf countries are strengthening cooperation with China, which has advanced AI and digital industries, fostering collaborations not only in industry but also between academia and research institutions. Additionally, with the expansion of smart city construction in the Gulf region, particularly around Saudi Arabia’s NEOM City, there has been a significant increase in demand for digital and mobility industries from Asia. Cooperation demand with South Korea is also rising, leading to discussions about the entry of South Korean digital platform companies into the Gulf region. In the aerospace sector, all six Gulf countries are investing in space, with ongoing efforts to collaborate on technology and space launch vehicles, particularly with four Asian nations.

Chapter 4 focuses on the cooperation demand and distinctiveness of major Asian countries in relation to the Gulf. In terms of cooperation methods, China relies on state-owned enterprises, Japan utilizes trading companies, and India builds industrial networks centered around its diaspora in the Gulf region. Additionally, the entry of startups is actively progressing, particularly in areas like UAE’s Masdar City, where efforts to attract startups are robust. This has led to an increase in demand from Chinese, Japanese, and Indian startups, aligning the interests of both regions. In Japan’s case, there are many areas of ongoing medium- to long-term cooperation, such as education, technical support, and exchanges, which have contributed to a high level of recognition for Japan within the Gulf region, often accompanied by academic collaboration.

In the energy sector, all four countries, including South Korea, have identified a demand for crude oil imports and infrastructure cooperation. However, while South Korea primarily secures infrastructure construction contracts focused on EPC (Engineering, Procurement, and Construction), China is engaged in construction projects that integrate its own equipment procurement and exports of intermediate goods. India is actively utilizing the Gulf Cooperation Council (GCC) as a platform for its initiatives. In the nuclear power sector, South Korea stands out due to the successful completion and operation of four Barakah nuclear power plants in the UAE, showcasing its competitiveness in the Gulf region. In contrast, China is participating in bids for Saudi nuclear power construction. Accordingly, the cooperation between major Asian countries and the Gulf exhibits distinct characteristics by country. China is engaging in simultaneous hardware and software collaboration, with government- led initiatives predominating and leading to large-scale industrial cooperation. This has resulted in active participation of Chinese state-owned enterprises in the Gulf. China is attempting to diversify its global supply chains to avoid technological competition with the U.S., which has led to an increase in the entry of Chinese high-tech companies into the Gulf.

Japan also sees active intergovernmental cooperation, but its trading companies are playing a crucial role in major industrial sectors, while friendship associations are fostering local networks in Gulf countries. Additionally, Japanese companies primarily enter the UAE, using it as a base to expand into other Gulf nations.

Meanwhile, both China and Japan are maintaining long-term corporate collaborations through joint ventures, which allow them to minimize investment risks while securing operational control of locally established joint enterprises. India is strengthening its economic cooperation with the Gulf region through policies like Look West and Neighborhood Policy, forming networks centered around the Indian diaspora through Indian workers and businesses in the Gulf.

Chapter 5 provides implications for South Korea based on the preceding content. First, there is a need for key entities to lead local cooperation networking in the Gulf, and this study emphasizes the importance of industry associations and KOTRA (Korea Trade- Investment Promotion Agency). Second, the demand for expanded technological cooperation is clearly evident in the Gulf region. To successfully enter this market, South Korean companies should enhance technological cooperation through various channels to foster a skilled workforce that can be employed locally.

Third, considering South Korea’s position in the Gulf region, there is a need for strategic selection and concentration in terms of sectors and countries. Fourth, taking into account that China and Japan are forming value chains and attempting vertical integration by sector, it is necessary to increase the proportion of O&M (Operations and Maintenance) contracts when securing infrastructure projects.

Finally, the technological supremacy competition between the U.S. and China is also unfolding in the Gulf, prompting Gulf countries to diversify their cooperation away from a sole focus on China. South Korea should seize the opportunities arising from this shift. This study proposes several policy recommendations, including the expansion of multilateral cooperation such as Korea-China-Japan + Gulf collaboration, investments to strengthen local networks, enhanced cooperation in joint research and workforce training, activation of entry into special economic zones, and the provision of practical information and corporate matching for private companies. In the energy sector, the study suggests: 1) diversifying contract types beyond EPC procurement, 2) expanding petrochemical cooperation from Saudi Arabia to the UAE, 3) exporting nuclear power in response to the growing demand for nuclear facilities in the Gulf region, and 4) strengthening cooperation in hydrogen technology. In the field of advanced industries and technology, the recommendations include: 1) building digital platforms, 2) expanding R&D cooperation in advanced technologies, and 3) enhancing cooperation in AI technology.

The semiconductor industry is crucial not only for economic growth but also for leading future industries through innovation and technological development. Dominance in this sector is reflected through technological leadership, with leading nations at the forefront of scientific research and technological innovation, substantially contributing to global influence and economic competitiveness. Additionally, the semiconductor industry is vital for national security. Semiconductors are essential components in advanced weapons systems and are fundamental to nearly all modern military equipment and systems, including missiles, drones, radars, and communication devices. Consequently, controlling semiconductor supply chains and strategic technologies is critical for national security. Given the semiconductor industry’s importance, the battle for technological supremacy between the U.S. and China is central to their hegemonic rivalry. The United States has recognized that rapid advancements in China’s semiconductor technology could pose a significant risk to national security and has imposed various export controls, investment sanctions, and financial sanctions targeting China’s semiconductor industry. These U.S. measures impact not only China’s semiconductor industry but also significantly affect global semiconductor firms in Japan, the Netherlands, Taiwan, and South Korea, leading to substantial changes in the global semiconductor supply chain. However, China already plays a significant role as a global hub in semiconductor manufacturing and supply, and there is keen interest in the outcomes of the U.S. sanctions.

This study addresses three critical questions to understand the core of this issue and provides an in-depth analysis:

1. Can China overcome U.S. sanctions and continue to develop its semiconductor industry?

2. What impact will U.S. sanctions on China’s semiconductor industry have on the global semiconductor industry and the current global semiconductor supply chain?

3. How will the U.S.-China semiconductor hegemony competition affect Korean semiconductor industry and economy, and howshould we prepare policy-wise?

The first question explores whether China’s semiconductor industry can overcome U.S. sanctions and enhance its position in the global semiconductor supply chain. This study answers by analyzing the competitiveness of the global semiconductor industry, including China, from 2000 to 2022, and comparing changes in competitiveness over the past two decades. The analysis uses UN Comtrade data to derive various competitiveness indices and also examines semiconductor technology competitiveness by analyzing patent registrations in the semiconductor field over the past 20 years for major countries and the top 10 global semiconductor companies.

The analysis of memory semiconductors showed that South Korea had the highest RSCA (Revealed Symmetric Comparative Advantage) and TSI (Trade Specialization Index) values, indicating strong competitiveness. In contrast, China showed a comparative advantage in production and export for most of the analysis period, asindicated by positive RSCA values, but its TSI values were negative throughout, indicating difficulties in achieving trade surpluses and overall lower competitiveness in the memory semiconductor industry. In the system semiconductor competitiveness analysis, Taiwan showed the highest competitiveness, followed by South Korea, which showed positive RSCA and TSI values. China, on the other hand, showed low competitiveness in the system semiconductor sector, with RSCA and TSI values between -0.5 and 0.

In the semiconductor manufacturing equipment industry, Japan and the U.S. displayed high RSCA and TSI values, indicating strong competitiveness, while China showed very low competitiveness, with both indices close to -0.5 during the analysis period.

The technological competitiveness analysis based on patent registration data for memory semiconductors, system semiconductors, and semiconductor manufacturing equipment calculated indices such as RTA (Revealed Technological Advantage), TS (Technology Strength), CPP (Cites per Patent), and PII (Patent Impact Index). The results for China were similar to the trade data-based competitivenessanalysis, indicating a challenging situation for China to overcome U.S. sanctions in the short term. U.S. sanctions are expected to strictly limit China’s advanced chip production capabilities for the foreseeable future. Especially, the analysis based on semiconductor patent technology showed that global semiconductor manufacturers heavily rely on core technologies from the U.S., making it difficult for these companies to circumvent U.S. sanctions. However, the biggest problem the U.S. faces is securing active cooperation from global semiconductor companies and allies. There are significant conflicts between the U.S. and European countries over specific policies like the Inflation Reduction Act (IRA) and related subsidies. Global semiconductor companies are also likely to face substantial losses due to the sanctions, and there is considerable resistance to the U.S. administration’s policies, especially from EU countries, regarding how actively they will cooperate with U.S. policies against China. Additionally, active support from the Chinese government could greatly aid in enhancing the competitiveness of its semiconductor industry. Ironically, U.S. sanctions might actually accelerate innovation and self-reliance in China’s semiconductor sector, posing a short-term obstacle but unlikely to hinder the industry’s long-term development.

To answer the second question, this study analyzed the roles and positions of the countries in the global semiconductor supply chain through network analysis using trade data and firm-level supply-demand relations, focusing on global rankings and market shares in various semiconductor sectors. The analysis showed that China is already playing a significant role as a global hub in the semiconductor and semiconductor manufacturing equipment sectors, making it very difficult to quickly exclude or significantly reduce China’s role in the global semiconductor supply chain. In particular, the analysis of inter-firm cooperation and technology transfer relationships using Factset data showed that U.S. companies are major suppliers across the semiconductor industry, and applying a 0% de minimis rule would have a significant impact on the global semiconductor supply chain, making it impossible for most companies to evade these sanctions.

Despite these sanctions, it has been revealed that Chinese tech companies are importing and using advanced chips banned for export by the U.S. administration, and U.S. companies like NVIDIA are also circumventing sanctions by exporting modified semiconductor stargeted at the Chinese market. These incidents are occurring frequently, and the effectiveness of U.S. sanctions against China’s semiconductor industry depends on how much support the U.S. can secure from its allies. The U.S. is expected to transition to a multilateral export control system like the ‘Wassenaar Arrangement’ to fill the gaps in these sanctions.

Regarding the restructuring of the global semiconductor supply chain, it is expected to bifurcate due to U.S. sanctions. Advanced semiconductor production is likely to shift to a supply chain system centered around the U.S. and its allies, while the supply chain system for general-purpose semiconductors is expected to strengthen around China. In particular, no country can produce general-purpose semiconductors as cheaply and competitively as China, which is expected to increase its global market share in this sector. Additionally, developing countries like India, Vietnam, and Thailand import the most semiconductor manufacturing equipment from China, and the establishment of a supply chain system for low-cost general-purpose semiconductor production between China and these countries is also an issue worth watching.

In addressing the third question, the study examined the impact of U.S. semiconductor sanctions on the Korean semiconductor industry through three scenarios: the control of exports for semiconductor manufacturing equipment, the control of exports for AI semiconductors, and the imposition of increased tariffs on China.

The first scenario involves export control of semiconductor manufacturing equipment, where South Korea experienced a significant decline in semiconductor equipment exports compared to other countries following the U.S. semiconductor equipment sanctions in October 2022. China’s imports of semiconductor manufacturing equipment sharply decreased from October 2022, when U.S. sanctions began, to February 2023, but increased significantly from August 2023, eight months after the sanctions started. The U.S. initially saw a decrease in exports to China, but these later increased, and the Netherlands was not affected by the sanctions, with exports to China increasing. Even after controlling for variables such as the recent semiconductor business climate, South Korea’s imports of semiconductor manufacturing equipment have significantly decreased, and this trend does not appear to be following any particular trend. Also, South Korean manufacturing equipment is almost not included in the U.S. sanction items, while the U.S., the Netherlands, and Japan have many items essential in the semiconductor manufacturing process, which Chinese companies would likely prioritize purchasing with their current capital.

The second scenario involves AI semiconductor export control, which assumes the worst-case scenario affecting DRAM production. In this scenario, the supply of DRAM for AI semiconductors is assumed to be delivered by TSMC after final assembly through Taiwan’s export of HBM. This scenario also showed a significant negative impact on the Korean economy.

The third scenario involves an increase in U.S. tariffs on Chinese semiconductors under Section 301 of the U.S. Trade Act, which imposes high tariffs. In this scenario, exports of semiconductors produced in China to the U.S. decreased, while South Korea’s exports to the U.S. increased long-term due to trade diversion effects.

In conclusion, only the increase in U.S. tariffs on Chinese semiconductors is expected to have a positive impact on us due to trade diversion effects, while the export reduction of semiconductor manufacturing equipment and AI semiconductors such as HBM chips due to U.S. sanctions is expected to negatively affect us.

The U.S.-China semiconductor hegemony competition is already significantly limiting the business activities of our companies, and the negative impacts are likely to grow in the future. The U.S. is already responding to the potential impacts of this hegemony competition. The U.S. is relying on advanced semiconductor manufacturing by companies like Samsung and TSMC while fostering its domestic semiconductor companies like Intel and enhancing the backend chip post-processing capability through government subsidies to increase the resilience of the semiconductor supply chain.

In contrast, China, as previously discussed, is increasing its global market share centered on current legacy chips. In particular, the backend chip post-processing sector, which is technically less demanding and has a lower barrier to entry, could become an area where China can intentionally control the global supply chain based on its manufacturing capability and high market share. Therefore, such hegemonic disputes using this leverage are likely to continue between the U.S. and China, and the Korean government and companies need to prepare for this.

Korean companies have limitations in upgrading semiconductor manufacturing processes invested in China due to current U.S. sanctions on China. Therefore, in the medium to long term, advanced semiconductors are likely to be produced only in domestic or allied countries including the U.S. Ultimately, although production in China has been an optimal strategy for companies in terms of cost and market aspects, the U.S.-China hegemony competition makes it inevitable to relocate production bases for advanced semiconductor production. However, our current domestic semiconductor ecosystem is not more competitive than the ecosystem established in China.

This study recommends a series of policy measures aimed at bolstering the domestic semiconductor industry. These include strengthening the semiconductor manufacturing base and ecosystem, enhancing the added value of the industry, ensuring supply chain stability, and managing semiconductor operations in China effectively. It also suggests fortifying supply chain cooperation within the Korea-U.S.-Japan economic security alliance, controlling technology leaks, preventing talent outflow, and fostering a competitive innovation ecosystem. Additionally, the study advises managing supply chain risks, developing both short- and long-term production strategies, and promoting open trade policies and international cooperation.

Executive Summary

I. Introduction: Motivation

II. Possible Reasons for Falling Birth Rates

III. Data and Methodology

IV. Per Capita GDP and Fertility

V. Labor Market Considerations

VI. Did APEC Contribute to Falling Fertility?

VII. Policy Implications and Conclusion

References

Appendix

In the last ten years, fertility rates for advanced and developing economies have been falling faster than expected. Korea has been leading the decline, but almost all advanced and developing economies have experienced accelerated decline in birth rates. Some researchers now expect the world to start experiencing falling global population as quickly as in 2030s.

Even more surprising is that fertility rates for APEC economies have been falling even faster. APEC economies with the highest fertility rates are only slightly above the replacement rate of 2.1; with most economies, even developing members, in the 1% range. This paper is intended to be an exploratory dip into looking at correlations between birth rates and various economic data. We try to examine some of the popular reasons behind the falling birth rates, to see whether they have validity based on data, and see whether APEC economies are special in the sense that the birth rates are falling faster for APEC economies. The paper looks at economic data using panel data regressions to see why birth rates are falling overall, and why they are falling faster for APEC economies. We will concentrate more on trying to find correlations between variables in the data than coming up with theoretical reasons, which will require a much richer data set.

In Section II, the paper lists some of the popular reasons often cited for declining birth rates; Section III is a short general discussion on the data used. Sections IV and V examines whether the data backs some of these popular reasons for the decline. Section IV looks at the relationship between some basic economic growth variables and fertility rates, and serves as a base for further analysis. Section V looks at the relationship between employment data and fertility rates, Given the faster fertility decline for APEC economies, Section VI looks at whether the formation of APEC had a role in the faster decline of fertility rates. Appendix A looks at the relationship between gender education disparities and fertility rates, and Appendix B is a short exploration on whether there is a case to be made that gender disparities in housework is a factor in lower fertility rates.

In this paper, we used panel data of more than 180 economies to examine some factors affecting fertility rates. The factors examined included economic growth factors such as per capita GDP and GDP growth rates; gender based labor and employment factors such as male and female labor participation rate, and the ratio of male and female workers working in various industries. We also considered how some gender based disparities in education, and time spent doing housework for men and women affected fertility rates, though the results are less definite for these cases due to irregular nature of data available. We ran regressions on the global data set, and then for some regressions, only on data for APEC member economies.

Where we used global panel data, we re-confirmed some results that researchers had found before – namely, the higher the per-capita GDP, the lower the fertility rate; the higher the growth rate, the lower the fertility rate. So more income is not always the answer for fostering fertility rates. However, we did find that current growth variables predicted fertility rates better than past growth rate variables, showing perhaps that the trend of falling fertility rates is a more powerful force than a good economic environment fostering more births. These regressions also showed that APEC economies are qualitatively similar to the global group, but with a faster decline. Given similar situations, APEC economies experience a lower fertility rate than global group as a whole.

Using the economic growth variables as controls, we added labor market data to the regressions, and we found that, for the global group, increases in male and female labor participation increased fertility rates. However, perhaps somewhat against expectations, the effect of male labor participation rate had greater effect than female labor participation. Again, given similar situations APEC economies had lower fertility rates. When we used only APEC economy data, female labor force participation had no significant effect on fertility rates. Only the male labor force participation mattered, and higher the male participation rate, higher the fertility rate.

Then we used the shares of male and female labor force on agriculture, industry (manufacturing) and service industries. For the global data set regressions, as expected, a rise of the share working in agriculture would raise the fertility rate, and a rise of the share working in industry would lower fertility rate, as expected. Service industry participation came in between – the effect on fertility rate higher than industry and likely a positive effect, but lower than the effect from agricultural industry participation. The results were same for males and females.

However, when we used only APEC economy data, the qualitative results were significantly different. Male labor force industry share behaved the same as the global group, but for females, share of workers in services had a higher positive effect on fertility rate than agriculture. Industry, as expected had the lowest and negative effect. The effect of female workers participation in different industries on fertility rates seems to be significantly different for APEC economies compared to global group as a whole. Which may be the reason why APEC economy fertility rates fell faster than the global group, but it may also imply that if APEC economies give more flexibility to female workers in service industries, fertility rates may pick up. Further and deeper studies should be taken to see whether the pattern of female employment in APEC economies differ significantly compared to other economies, especially the possible differences between developing APEC economies and other developing economies.

Analysis looking at gender disparities in education for primary and secondary education showed that it is the disparities in secondary education which may be the key to differences in fertility rates, but the results should be taken carefully, since the data for gender disparity in education was available irregularly, so an unbalanced panel data was used, and gender disparities for primary and secondary education seems to be highly correlated. Also, the time disparity between men and women doing housework was also examined, but there were no results that led us to believe that the disparity in doing housework affected fertility rates, contrary to many popular media reports in Korea and elsewhere. But again, data was only available irregularly, so an unbalanced panel data was used, so results may not be as credible as regressions using labor force variables. For these regressions, a separate APEC economy regressions were not attempted due to paucity of data.

These regression results show that declining fertility rate is a strong trend based on rising wealth and growth rates; but the trend may be partially reversed if appropriate labor market adjustments can occur. For APEC economies, encouraging women to go into the services sector which perhaps offer an urban living coupled with flexible labor time schedule may partially offset the declining fertility rates.

Drawing some policy implications from the analyses, while Korea and other APEC economies may be able to keep fertility rates from falling “too low,” it will not be able to raise the rates to the replacement rate of 2.1. Thus, when designing welfare policies, the policymakers must keep the declining population and demographic implications in mind. Over-promising benefits for post-retirement public pension will become a critical problem, and governments should encourage private measures to the public to get them ready for post-retirement.

Second, for would-be mothers, encouraging employment in the service sector may alleviate some of the rapid decline in the fertility rates. Encouraging employment in the services sector, making services job for women available in small and large cities may do better in raising fertility for APEC economies. Women who work for the public sector tend to have more children, in part due to more flexible schedules and consideration for pregnant mothers.

Also, for fertility rates, male employment seems to be as important or perhaps more important than female employment. So, while more flexible time scheduling may be warranted for the would-be mother, any income implications should be approached from the point of view of the entire household.

While the Korean media often cites complaints that men do not do enough housework, as a contributor to low fertility, using global data, this study did not find any particular evidence for that explanation. While the complaint may be valid for Korea, there seems to be little reason to believe that it is a major reason globally, but because of data deficiency, the results may not be clear cut.

Of course, more research is needed. During the modernization and development process, the economic position of husband and wife in the family seems to change from being complementary to more of substitutes – where in the olden days, women specialized in housework aspect of the household and men specialized in wage earning or outside work, now men and women have similar work characteristics, and the global group regressions in this study did not consider such changes in characteristics about husband and wives; but the results that we have derived may be showing the effects of such changes.

Executive Summary

1. Introduction

2. Background

3. Data
3-1. European Social Survey
3-2. Dutch Parliamentary Election Panel Study
3-3. French Electoral Study

4. Econometric Specifications
4-1. European Social Survey
4-2. DPES and French Electoral Study

5. Estimation Results
5-1. Estimation Results Using ESS Data
5-2. Estimation Results Using DPES
5-3. Estimation Results Using French Electoral Study
5-4. Variable Selection Using LASSO

6. Conclusion

References

This paper explores the connection between individuals’ barrier preference toward immigration and refugee policy and how they are linked to voting behavior. We use three different datasets to tackle these two questions. We utilize multi-country survey data with abundant information regarding voters’ subjective attitudes toward immigrants to study the determinants of far-right voting in Europe. Notably, even after controlling for education, income level, or current employment status, which represents the human capital endow-ment of natives, industry-level comparative advantage and disadvantage, and political scale from left to right, we still find that a preference for immigration barriers has strong explanatory power for far-right voting behavior. We find that educational attainment and income level are important in explaining vot-ers’ anti-immigration attitudes, as the Heckscher-Ohlin model predicts. On average, voters with higher education and higher income are relatively more open to immigration and aware of their role in the economy.

In addition to the cross-country election studies that allow us to study the anti-immigration attitude, we also use election surveys conducted in the Neth-erlands and France to add more details on the role of individual immigration and refugee policy preference in the voting behavior. The election survey on the parliamentary election of the Netherlands provides a special identification approach that is not available in cross-country election surveys. The panel structure of the Dutch survey allows us to observe the voting history of re-spondents in 2012, 2017, 2019, and 2021 parliamentary elections. Using this information, this paper clarifies the characteristics of voters who newly join supporting right-wing populism. In other words, we study determinants of ‘switching’ voting behavior from non-populist parties to right-wing populist parties focusing on the refugee barrier preference. We explore whether atti-tudes towards refugees affect this switching behavior in the politics of the Netherlands. The election survey on French voters covers the most recent presidential election in France. We elaborate on how immigration policy pref-erences of French voters are related with the popularity of right-wing popu-list presidential candidates in France.

Considering that non-economic factors contribute to explaining the far-right voting behavior, utilizing other non-economic variables such as individ-uals’ sentiments towards various entities (including the government, legal sys-tem, and the European Parliament), and subjective evaluation of their own health and happiness can also add explanatory power, as numerous previous findings imply. For systematic consideration of these abundant variables in the ESS data, we use LASSO for variable selection. For this exercise, we con-sider two approaches in selecting the optimal penalty term, namely cross-validation (CV) and Bayesian information criterion (BIC). It is worth high-lighting that almost all of the immigration barrier preference variables are se-lected when using both CV and BIC for variable selection criteria.

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.

Critical minerals are essential for advanced industries like semiconductors, electric vehicles, and batteries, as well as for clean energy infrastructure. Major countries are actively pursuing trade agreements to ensure stable supplies of these minerals. This study analyzes key countries’ trade agreements related to critical minerals and derives insights for Korea’s policies and trade negotiations. The study narrows its focus to binding trade agreements between countries.

Traditionally, mineral and energy regulations in trade agreements were declarative, but recent agreements by the U.S., EU, and Japan have introduced specific obligations and linked these to environmental and labor standards. The EU includes energy and raw materials (ERM) chapters in its trade agreements, while the U.S. tends to establish stand-alone agreements on critical minerals. The EU’s proactive engagement with resource-rich countries aims to reduce price volatility and promote fair trade, while U.S. agreements, such as with Japan, are primarily driven by the Inflation Reduction Act (IRA) electric vehicle subsidies and focus on establishing supply chains with allied nations. The U.S.-Japan Critical Minerals Agreement, for example, emphasizes the management of environmental and social risks within supply chains through well-defined environmental and labor provisions.

Based on these international trends, this study proposes the inclusion of a Raw Materials Chapter in Korea’s future Free Trade Agreements (FTAs), bench-marking the critical minerals agreements of the EU and the U.S. Specifically, this proposal aligns with the “Critical Minerals Security Strategy” announced by the Korean government in 2023, which advocates for expanded bilateral and multilateral cooperation and enhanced collaboration on critical mineral supply chains in FTA negotiations. When pursuing critical minerals agreements, Korea must carefully consider various elements such as the selection of partner countries, contents and types of agreement to pursue, and the order in which to conduct negotiations, as these factors are intricately interconnected and can influence the outcomes of other aspects.

In negotiating critical minerals agreements, several key provisions should be considered, including the definition of minerals, trade facilitation, exploration and production permits, environmental protection, labor rights, and cooperation clauses. For example, trade facilitation provisions might include prohibitions on export quotas, export tariffs, and price caps to mitigate financial risks and price volatility for companies.

The environmental and labor provisions evident in the EU-Chile FTA and the U.S.-Japan Critical Minerals Agreement are essential to aligning with the global trend of enhancing supply chain ESG standards and emphasizing responsible sourcing. It is necessary that Korea incorporates these provisions into its agreements, thereby ensuring mineral procurement is conducted in accordance with international standards. However, the adherence to international environmental and labor standards and the associated monitoring may impose additional costs on companies. Thus, a balanced approach is necessary, in hand with dialogue and coordination between the government and businesses to achieve consensus before negotiations.

Executive Summary
I. Introduction
II. Theory and Hypotheses
III. Data and Methodology
IV. Empirical Results
V. Policy Implications
References

While prior research has highlighted digitalization as a potential avenue for enhancing domestic revenue mobilization—a crucial component for the long-term economic and political development of economies—the relationship between digitalization and domestic revenue mobilization remains underexplored. This working paper contributes to the existing literature by examining how the interplay between digitalization and the government’s capacity to tax is influenced by governance quality, an aspect largely overlooked in previous studies. Empirical findings based on a time-series cross-sectional dataset including up to 159 economies from 2004 to 2021 show that a higher level of digitalization alone does not necessarily translate into a higher non-resource tax revenue-to-GDP ratio. However, when digitalization is coupled with sound governance—specifically in terms of voice and accountability or regulatory quality—it significantly boosts domestic revenue mobilization. The study also finds that the interaction effects between digitalization and these governance variables vary according to the levels of digitalization and development across economies. The findings and case studies presented in this paper underscore the importance of strengthening institutional frameworks alongside digitalization efforts to ensure enduring success in mobilizing domestic revenue, offering valuable insights especially for developing APEC economies where the potential for improvement is most pronounced.

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.