Global Supply Chains in the Post-Covid Multipolar World: Korea’s Options
Executive SummaryThe history of South Korea’s spectacular growth trajectory is based on its export prowess, and that industrialization narrative is based on a supply chain strategy that connected the economy to the global economy..
Shahid Yusuf et al. Date 2022.10.28Economic development, 경제안보ContentContentsExecutive SummaryContributorsIntroductionSection 1: Dawning of the Supply Chain EraSection 2: Korea’s Industrialization and Participation in Supply ChainsSection 3: Reengineering Supply ChainsSection 4: Learning from Past Shocks, Preparing for Shocks to ComeSection 5: Supply Chain Development beyond Manufactures to ServicesSection 6: Resilient Supply Chains for Key Industries: What it will takeSection 7: Options for Korea’s Supply Chain Management Going ForwardReferencesSummaryExecutive SummaryThe history of South Korea’s spectacular growth trajectory is based on its export prowess, and that industrialization narrative is based on a supply chain strategy that connected the economy to the global economy. Korea was able to manage this process with tremendous efficiency and success. Contrary to the experience of past decades, however, the current global constellation of factors and other supply- chain realities are forcing a re-examination of this approach. What specifically has changed?First, the reliability of supply chains was severely impaired by the Covid-19 pandemic and its consequences. Near-shoring or on-shoring became much more attractive as compared with efficient global supply chain management and the costs of interruptions as compared with higher inventory levels has changed the production calculus. Second, the continuation of a bitter economic rivalry between the United States and China has seen both nations trying to become more resilient in the procurement of inputs, with consequences for others, such as Korea. Third, the nature of production has shifted with new technologies and the necessity of securing essential minerals and metals needed for new products, such as electric car batteries and micro-chips. These factors mean that industries that that don’t quickly adapt to new circumstances will suffer competitive disadvantages in the global marketplace.South Korea has long prided itself on being an industrial powerhouse that can insulate itself from many global disturbances. However, as the scenario analysis undertaken by KIEP in 2017 has shown, innocent by-standers can be affected by trade wars, global turndowns, and now pandemics. Korea’s “middle power status “does not provide sufficient insurance in a world of shifting supply chains and geo-political strife. For this reason, KIEP has undertaken a new analysis of supply chain management with the aim of understanding new developments and better protecting today’s, and more importantly, tomorrow’s industries from future shocks.The purpose of this study is to identify Korea’ vulnerabilities and to take a first step at suggesting changes in both government and corporate actions to help protect the economy.As Gereffi (2021) notes the disruptions resulting from the Covid pandemic uncovered supply chain fragilities that companies had previously ignored. As a result, all economies, especially, highly open economies like Korea, must now reassess the risks to existing supply chains. The critical first step is to analyze these linkages and assess vulnerabilities. Previous emphasis solely on immediate cost factors must now be expanded to deal with events that can actually halt production, causing costly ripple effects throughout the economy. The response lies in taking concrete remedial action, such as diversifying into new, less vulnerable supply chains; seeking out alternative strategic partners for key inputs; and undertaking more analysis that subjects production to stress-testing of supply chains and imagining worst-case scenarios.One place to begin involves four industries have proven especially vulnerable to supply chain interruptions: semiconductors, large storage batteries, users of rare earths, and producers of medical supplies. It is noteworthy that Korea sources most of its storage batteries from China, which is also the supplier of lithium and rare earths of the requisite purity. The Covid pandemic and the war in Europe have exposed the Achilles heel of the high-tech industry: its dependence on scarce minerals, which need to undergo environmentally polluting processing before they can be utilized. A robust supply chain for cobalt or lithium or neodymium or manganese requires securing supplies of the raw material and then also establishing a degree of control over its processing either domestically or through the ability to source the refined product from multiple sources. This dependence makes Korea increasingly vulnerable and limits its ability to make other decisions in the national interest.Central to this discussion is the view that Korea has under-invested in access to strategic raw materials and that there is a disconnect between its industrial ambitions and its management of critical inputs. Investment has focused on the technologies, assuming that raw materials would be easily available. Other countries, such a China, a major competitor, have sought access to raw materials through extensive and expensive programs in Africa and elsewhere, some under the umbrella of the Belt-and-Road Initiative. By contrast, Korea’s outreach policies in both foreign assistance and foreign direct investment, have not kept pace.Analysis by Baldwin and Freeman (2020) provides some empirical data on China’s centrality in supply chain, draws attention to the importance of Germany and the U.S., and shows how extensive the linkages are between Korean and Chinese industries. “China really is the workshop of the world – it is central to the entire global network of trade and production.” Manufacturing inputs from China make up over 3.6% of every major nation’s manufacturing output. For Korea, the number rises to over 16% with close to 30 percent of Korea’s imports of certain intermediate inputs for electronics industry imported from China some manufactured by subsidiaries of Korean firms. China is also Korea’s number one export destination. Hence China is central to the analysis of Korea’s supply chains and their vulnerability.China’s drive for self-sufficiency is already reflected in the declining percentage of imports in GDP over the last decade or more, and in its massive investment in semiconductors, which China feels is a vulnerability that other countries can exploit. Central to China’s semiconductor industrial policy is the National Integrated Circuits Industry Development Investment Fund (known as the “Big Fund”), established in 2014 with $21 billion in state-backed financing. The Big Fund was renewed in 2019 for a second round of state financing that exceeded $35 billion. To date, China’s National IC Fund has invested $39 billion, of which 70% has been for front-end manufacturing with the goal to increase China’s share of global semiconductor production. This combined with the Made in China 2025 Report provides a very clear picture of China’s intention with respect to self-sufficiency, and these goals pre-date current supply chain concerns.Moreover, given the dependence of Korean electronics and storage battery producing firms on China’s markets and suppliers, the problem looms especially large. China has demonstrated an increasing proclivity to use its control over supplies of raw material and products to threaten and discipline trading partners and its wolf warrior diplomacy has signaled a readiness to go on the offensive against all countries at the slightest provocation.In response, Korea will need to forge more strategic alliances, something that doesn’t come easily to some chaebol giants. Government will have to align its R&D and other strategic investments with those of the corporate sector in a better coordinated manner; to fail to do so risks Korea falling behind China, Europe, and the US, all of whom are undertaking or assessing how to undertake more dramatic efforts to secure their supply chains and become more self-sufficient in key aspects of production. Having moved away from industrial policies pursued in the past, Korea may need to heed the lessons of greater corporate-government cooperation as practiced in Singapore, and certainly China, in order to maintain its competitive edge in newly emerging industries.While this study and others will have little difficulty in identifying areas where actions are needed, the challenges will rest in the sphere of political economy. Korea finds itself in a difficult situation of economic dependence on China and defense dependence on the U.S. This is a conundrum that will neither disappear nor diminish. In managing this difficulty, Korea needs to reduce both dependencies and manage its situation with clear- thinking, wise investments, coordinated national efforts and smart diplomacy. Although this study doesn’t deal with the geo-political issue, it does need to point out that the China dependency, largely on China’s terms, is worrying. Korea’s response to the China 2025 Report was inadequate, and China’s action in response to the THAAD deployment were at some level shocking, but perhaps not completely unexpected. So what’s to be done?Korea will need to do the following: It will need to invest it the resilience of its supply chains by which we mean it will have to move from “just- in-time” inventory management to “just-in-case” approaches to deal with increased uncertainty. It will have to add to the robustness of its supply sources by diversifying them; insofar as this involves a reduction of Korea’s dependence on China, this is a strategic investment worth undertaking. Next it needs to consider increasing redundancy of suppliers, namely, securing multiple sources of critical inputs. While this may add to the cost of doing business, the alternative of ignoring the chances of supply chain interruptions is costlier.A strategy for supply chains must be intertwined with a development strategy for the medium and the longer term as well. It must factor in the drivers of Korea’s growth both manufacturing and tradable services; geopolitical trends; technological change; the risks from shocks that could increase in frequency and severity; and the changing nature of supply chains as the Korean economy enters a postindustrial stage and the population ages. The biggest challenge is to design measures that can mitigate and manage the impact of disruptions to come.In summary, the actions noted below are advisable if Korea is to reposition itself and make its supply chain less vulnerable.● Continued diversification into high value products and services;● Diversification of sources of inputs to improve supply chain robustness and redundancy, even if this entails some loss of efficiency;● Adoption of a JiC strategy including the stockpiling of essential inputs possibly on a regional basis;● Innovation that reduces dependency on scarce materials;● Some reshoring of items of the greatest strategic importance;● Enhancing trade facilitation practices, transparency, and regulatory cooperation;● Creating mechanisms for consultation and cooperation in crisis situations.● Securing the growth of trade in services through agreements that dismantle the barriers to the flow of digital traffic and to FDI in services.In addition, Korea will need to seek out new long-term strategic partners for essential raw materials, especially key minerals, metals, and rare earths. This admonition leads to a central failure of policy in recent decades and that is to allow corporations to act in what they consider their best interests without considering national goals. Put differently, a number of OECD countries have moved their foreign assistance programs from pure development aid to assistance to strategic trade and investment partners (e. g., see cases of Canada, Australia, and the United Kingdom ). Here is a case where economic interests and political interests intersect and where government needs to take a strong role in forging new alliances with countries in control of strategic inputs.Options to reduce Korea’s dependence on China will not be easy and will not be cheap. Reshoring to Korea would be aided by government incentives and regulatory easing that encourages the inward flow of foreign investment. In addition, Korean outward FDI can proactively build production capabilities elsewhere - as TSMC, Samsung and Intel are now doing in the United States – for example in India as part of Korea’s New Southern Policy. Korea is already recalibrating its ties with the United States and with ASEAN – as is Japan. There are some natural alliances that seem feasible to explore and working more cooperatively with Japan would be in both countries’ economic interests.As it noted in the final section of this report, there are many steps that Korea can undertake to improve its supply chain management position and reduce its vulnerability. To be effective, however, both government and business will have to work in tandem. Moreover, securing safer supply chains will need to be a national priority. Hoping that the global system will return to its pervious state is foolhardy. Expecting that China will be a benign competitor is also ignoring current realities. There are new opportunities for Korea to reposition itself for the production of new industries, and, as the report argues, the production of new digitally-based services; however, any viable innovation and investment strategy will need to make supply chain management a critical component. Korea’s future growth performance may well depend on it.
Major Issues of DDA Services Negotiations and Implications for Korea
This study seeks to stock-take and assess major issues of Doha Development Agenda (DDA) services negotiations. Unlike previous studies in this area, this study tries to analyze the plurilateral negotiations based on several pluril..
June Dong Kim Date 2022.10.25Multilateral negotiationsContentThis study seeks to stock-take and assess major issues of Doha Development Agenda (DDA) services negotiations. Unlike previous studies in this area, this study tries to analyze the plurilateral negotiations based on several plurilateral requests which were leaked on the internet.As the major issues at the multilateral level addressed at the Special Session of Council for Trade in Services, this study intends to analyze three areas, that is, the assessment of trade in services, the review of negotiation progress, and the modalities for the least developed countries.With regard to the plurilateral negotiations, among the total of 22 services sectors where plurilateral requests have been exchanged, this study aims to assess 19 services sectors, including 15 sectors whose plurilateral requests were leaked on the internet.As for the discussions at the subsidiary bodies, this study seeks to assess those conducted at the Working Party on GATS Rules, Committee on Trade in Financial Services, Committee on Specific Commitments, and Working Party on Domestic Regulations.As policy implications, this study suggests a pro-active position with regard to the second revised offer, considering the fact that in most of the service sectors, Korea has been experiencing remarkable developments.In addition, with regard to the other negotiation strategies, this study recommends for Korea to request the removal of MFN exemption measures, incorporation of additional commitment in architectural services related to qualification requirements as in Korea’s UR schedule, and request of improving offers in the five infrastructure services of telecommunication, construction, distribution services, financial services, and maritime services.SummaryThis study seeks to stock-take and assess major issues of Doha Development Agenda (DDA) services negotiations. Unlike previous studies in this area, this study tries to analyze the plurilateral negotiations based on several plurilateral requests which were leaked on the internet.As the major issues at the multilateral level addressed at the Special Session of Council for Trade in Services, this study intends to analyze three areas, that is, the assessment of trade in services, the review of negotiation progress, and the modalities for the least developed countries.With regard to the plurilateral negotiations, among the total of 22 services sectors where plurilateral requests have been exchanged, this study aims to assess 19 services sectors, including 15 sectors whose plurilateral requests were leaked on the internet.As for the discussions at the subsidiary bodies, this study seeks to assess those conducted at the Working Party on GATS Rules, Committee on Trade in Financial Services, Committee on Specific Commitments, and Working Party on Domestic Regulations.As policy implications, this study suggests a pro-active position with regard to the second revised offer, considering the fact that in most of the service sectors, Korea has been experiencing remarkable developments.In addition, with regard to the other negotiation strategies, this study recommends for Korea to request the removal of MFN exemption measures, incorporation of additional commitment in architectural services related to qualification requirements as in Korea’s UR schedule, and request of improving offers in the five infrastructure services of telecommunication, construction, distribution services, financial services, and maritime services.
Merkel Era of 16 Years: Observation on Major International Issues and Policies
While Angela Merkel lead Germany for nearly 16 years from November 2005 to December 2021, the voices of both Germany and the EU in the international community had been elevated. Germany, once been called “the sick man of Europe,”..
Hyun Jean Lee Date 2022.09.08Competition policy, Political EconomySummary
While Angela Merkel lead Germany for nearly 16 years from November 2005 to December 2021, the voices of both Germany and the EU in the international community had been elevated. Germany, once been called “the sick man of Europe,” revived only to achieve economic development and industrial improvement, as well as reinforcing her position in the global society. The EU, on the other hand, has developed to strengthen its solidarity within the Member States by suggesting common responses to the challenges. During Merkel’s era, numerous challenges have occurred in the field of economics, politics, and environment/security, not merely striking Europe, but also the world. Merkel’s “slow and steady” approach had been successful handling the situations. Her policies implemented to seek stability had been overall appreciated by the public.
Changes and Implications of FDI Policies in Major Developed Countries
Due to COVID-19, global FDI has decreased rapidly, and the trade environment to attract foreign investment is rapidly changing. Amid the decreasing inflow of FDI worldwide, the trend of corporate tax cuts continues as competition ..
Hyung-Gon Jeong and Ara Lee Date 2022.07.29Foreign direct investment, Overseas Direct InvestmentSummaryDue to COVID-19, global FDI has decreased rapidly, and the trade environment to attract foreign investment is rapidly changing. Amid the decreasing inflow of FDI worldwide, the trend of corporate tax cuts continues as competition among major countries to attract foreign investment intensifies. The global average corporate tax in 2000 was 28.3%, but fell to 20% in 2021. The OECD average fell from 32.3% in 2000 to 22.9% in 2021. Along with the trend of corporate tax cuts to attract investment, there is also a movement to set the so-called global minimum corporate tax rate, aiming to prevent excessive corporate tax cuts. On July 1, 2021, following negotiations at the OECD, 130 countries which account for 90% of the world’s GDP agreed to apply the global minimum corporate tax rate of 15% from 2023. Subject to the application are multinational companies with total annual sales of EUR 750 million or more. In recent years, active reshoring policies to protect domestic industries and create jobs in developed countries have made it more difficult to attract FDI to Korea.On his fifth day in office, President Biden announced Executive Order 14005, which prioritizes the federal government’s financial support and procurement, laying the legal foundation for the revival of U.S. manufacturing and job creation through the “Made in America” and “Buy American” initiatives. In addition, the Infrastructure Investment and Jobs Act (H.R. 3684), which legislated federal support for domestic infrastructure construction, passed both the Senate and the House of Representatives in the 117th Congress.Advanced countries, including the United States, are pursuing active industrial policies and attracting foreign investment to build their own supply chains, which are also expected to pose difficulties in attracting domestic investment. Developed countries are providing investment support for the purpose of stabilizing the supply of semiconductors and integrating into the GVCs of key materials for the fourth industrial revolution. The U.S. Innovative Competition Act (USICA), which passed the U.S. Senate, established a semiconductor support program centered on the Department of Commerce, which invests USD 52 billion for the development of the U.S. semiconductor industry. Japan’s Ministry of Economy, Trade and Industry also decided to provide 19 billion yen (KRW 200 billion) worth of subsidies to joint R&D between Taiwan’s TSMC and Japanese companies in 2021 to enhance semiconductor competitiveness and strengthen GVC linkage.Developed countries are actively attracting foreign investment to reshape their own supply chains, and are also expanding restrictions on foreign investment for the purpose of securing technological supremacy and protecting national security. Investment regulations introduced in 52 countries in 2020 increased by 43% compared to 2019, the highest level since 2003, and most of them have been introduced for national security purposes.This report was designed in accordance with the need to reorganize the domestic foreign investment attraction system according to the aforementioned changes in the global FDI environment. In the case of advanced countries, policies on attracting foreign investment are being promoted more actively, and Korea lies in a disadvantageous environment to attract foreign investment, such as withdrawing tax breaks for foreign investment. This is because foreign investment is still effective in technology transfer, technology development and employment promotion, and presents a good opportunity and means to promote the incorporation of domestic companies into GVC.In addition, countries around the world are strengthening regulations on foreign investment in terms of security, technology, and intellectual rights protection, and it is necessary to review our current foreign investment policy in terms of national security and domestic industry protection through case analysis of advanced countries. Also, with the inauguration of a new administration in Korea in 2022, it is necessary to prepare a timely reform (draft) of the foreign investment attraction support system in line with the changing FDI environment and investment promotion policies for the next five years. And at the same time, the report can provide very useful information on overseas investment environments to Korean companies planning to expand overseas.The following summarizes the policies to attract foreign investment in major developed countries by dividing them into foreign investment regulatory policies to provide investment attraction incentives and those to protect high-tech sectors, and summarizes the implications for Korea’s foreign investment attraction policy.First, in the case of Hong Kong and Singapore, various policies have been promoted to establish business hubs for specific industries while providing various incentives to attract foreign investment. From the perspective of Koreans, these policies are the best examples and are the targets we should benchmark. One of the characteristics of the foreign investment attraction systems in Hong Kong and Singapore is that among the various support systems, cash grants are very diverse. Hong Kong and Singapore operate a tax system that does not discriminate between domestic and foreign companies. In particular, Hong Kong exempts tax on income from the aviation and shipping industries as a way to support business hubs. In addition, Hong Kong and Singapore have simple tax systems. In the case of Hong Kong, there are only business income tax, property tax, and salary income tax, sales tax, capital gains tax, dividend income tax, value-added tax, withholding tax, and inheritance tax. As a free trade port, Hong Kong does not impose tariffs on imports and exports.Hong Kong also runs a very large cash grant program. It operates a green and sustainable growth subsidy system, an innovation and technology fund, an incentive organized by Cyberport, and a smart transportation fund, and each program operates a wide variety of systems. In Korea, although a cash grant program has been introduced, there are limitations in operation, and it is not widely used like Hong Kong and Singapore. Hong Kong’s location supports companies by creating specialized complexes, Hong Kong Science & Technology Park being the most representative example.Due to the nature of the city, Hong Kong cannot provide industrial complexes as locations, and mainly supports startups specialized in high-tech technologies in building locations. In addition, acceleration programs simultaneously incorporate space support programs. In the case of Korea, various incubation programs or systems are currently being created to support startups. However, it is necessary to further revitalize the location support system, which provides space to startups along with comprehensive support programs.In the case of Singapore, the most representative investment incentive is the tax reduction system. Singapore’s tax reduction system is widely operated. Various incentives including the general corporate tax reduction are provided to establish leading industries and intellectual property that increases added value. Like Hong Kong, it operates systems such as aircraft rental and shipping incentives to strengthen its function as a free city. This is interpreted as a system to strengthen Singapore’s function as a logistics hub and further strengthen its current competitiveness. In addition, in order to strengthen its function as a financial hub and intermediary trade center, it operates various specialized support programs for corporate tax reduction and exemption for companies in this industry.Singapore’s cash grants are well known for their scale and anonymity. The Energy Efficiency Enhancement Fund is an official cash aid program. In addition, cash is also provided for the repair and expansion of buildings. Various types of programs are operated to support startups, and these programs are also essentially cash support programs. However, most of the cash support in Singapore is paid only if the company spends first, and is supported legally and in accordance with the support rules through evidentiary documents for subsequent expenditures. Other support programs include granting permanent residency to those who have invested in Singapore with certain conditions, and guaranteeing visas to those who have certain qualifications, so that necessary technicians and experts can work in Singapore.As seen above, the policies to attract foreign investment in Hong Kong and Singapore literally institutionalized various investment incentives to attract foreign investment. On the other hand, the U.S., Japan, and the UK are actively attracting foreign investment in terms of industrial policy to stabilize the supply chain, upgrade the value chain, and enhance the competitiveness of their industries, while strengthening regulations on attracting foreign investment to protect their high-tech industries. Although there are some differences in foreign investment concentration industries in each country, foreign direct investment is intended to be used as a way to foster various high-tech and future industries such as AI, big data, and future mobility, along with areas that are spread by digital transformation (DX). Strategic industries to be fostered are selected and these are intended to attract technologies and capital that the country lacks by attracting foreign investment. In the case of Singapore, companies with advanced science and technology or start-up support programs are promoted, and the UK also implements policies to attract patent-holding companies.Meanwhile, advanced countries such as the United States, Japan, and the United Kingdom are using foreign investment attraction as a policy tool to support underdeveloped regions in terms of balanced regional development. In the case of the UK, enterprise zones are operated in areas such as England, Wales, and Scotland, and as of 2022, a total of 73 enterprise zones have been designated to actively attract investment in promising industries by individual regions.In the case of the United States, it is very active and open to foreign investment, and there are basically no restrictions on the type of investment. The foreign investment attraction policy operates various systems in each state to attract foreign investment at the state level rather than the federal government. The Trump administration pushed for a pro-business policy through corporate tax cuts, which seems to have had a positive effect on attracting foreign investment. In the United States, tax cuts are also the most prioritized incentives to attract foreign investment. Various cash support systems are also being used very actively for industrial innovation. Active support is provided for technology transfer to SMEs, innovation partnerships, early engineering research, and industry-academic cooperation research. Various programs to provide office locations are mainly used, such as in the special zone systems in Japan and other developed countries. Free trade areas and special opportunity zones are in operation, as well as various loan programs.In the case of Japan, policies to attract foreign investment in consideration of the region are operated along with a wide variety of support policies. Foreign investment is used as a means to revitalize the local economy, and to this end, the central government not only offers various subsidies but also guarantees various preferential measures specialized for foreign companies at the local government level. Japan also actively uses its tax system to attract foreign investment, and corporate tax is also being lowered. Various tax benefits are granted to foreign corporations. Depending on the type of corporation, corporate tax is applied differently, and it is used in various ways, such as open innovation, local base strengthening tax system for local revitalization, R&D tax system, tax system for securing talent and expanding income of SMEs, and DX investment promotion tax system. Japan has a much more diverse and wider scope in the use of corporate tax than Korea. Japan also operates various cash grant programs. Most importantly, cash grants are used first for domestic investment to stabilize supply chains. Cash grants are also used in areas that are essential for fostering future industries, such as green innovation. Japan’s location support system is also operated in the form of a special zone like the United States. These special zones are operated for various purposes such as a special structural reform zone, comprehensive special zone, special national strategic zone, special revival zone, and a startup eco-city hub city.The UK is also using various methods to attract foreign investment to create jobs and expand domestic investment. First, the tax was lowered slightly, and from 2023, corporate tax will be applied in three stages. In terms of corporate tax reduction and exemption, corporate tax rate benefits vary depending on the type of reduction program. Venture capital, corporate investment, and early corporate investment are representative examples, but patent boxes are also well-known instruments, especially for corporate investments. This is a system to encourage the registration of intellectual property in the UK and promote the commercialization of patents, with the profits generated by these patents becoming eligible for corporate tax reduction or exemption. The UK is also actively using cash grants for foreign investment, most of these being given to companies that contribute to the local economy. There are systems in place to support office locations in special zones, which also incorporate enterprise zones. Creative industrial clusters and free trade ports are also examples of such location support systems.One of the notable phenomena in the foreign investment attraction policies of developed countries discussed above is to increase financial support along with support for venture investment. The support system for angel businesses or venture investment is being strengthened so that innovative technologies and ideas can grow into industries in the country.The following summarizes the lessons learned from the previous cases of advanced countries. Korea still has a low proportion of foreign investment compared to the size of its economy. ① Korea lacks exceptional incentive means to attract large-scale foreign investment, an issue which needs to be addressed. In the case of Singapore, as previously discussed, pioneer status can be granted, suggesting unconventional conditions such as tax exemption for up to 15 years. ② Another lesson that can be learned from the case of advanced countries is that these countries are using cash grants very actively. However, in the case of Korea, it is necessary to evaluate the economic ripple effect that can be obtained from foreign investment in cash grants, and seek methods to support it accordingly. In particular, in the case of the United Kingdom and the United States, incentives are comprehensively supported by evaluating the economic backwardness of the location. In our case, corporate support is uniformly divided into metropolitan areas and non-metropolitan areas, but in the case of the UK, various elements such as the local unemployment rate, GRDP, financial independence, industrial structure, and infrastructure are comprehensively considered when evaluating regional economic backwardness.③ One of the characteristics of the case of advanced countries is that rent reduction systems are used. In the case of Japan, locational support is provided for various types of special zones, and other countries surveyed in this study also use industrial complex support systems. In our case, the rent reduction or exemption under the Foreign Investment Promotion Act is 1% of the land price (Article 19, Paragraph 4 of the Enforcement Decree of the Foreign Investment Act), which is significantly lower than the 5% rent applied to ordinary industrial complexes. In particular, only foreign investments exceeding $1 million which involve high-tech projects are eligible for 100% rent reduction, which greatly reduces efficiency in terms of the operation of incentives. It would be desirable to switch to a system where the reduced rent is returned in the form of reinvestment.④ It is necessary to supplement the current issuance-type cash support system by introducing a loan-type cash support system and a fund-type cash support system like the UK and Japan. Since the cash support limit can be supported up to 30% of the total investment in the case of the current grant type, it is necessary to expand it to a higher 50% level for the loan type. As in the cases of Japan and the United Kingdom, it is necessary to benchmark loan-type cash support and cash support through fund creation. In particular, along with the loan-type cash support system, a method of combining and operating a part of investment funds using domestic private financial institutions can also increase the effectiveness of cash support.⑤ Finally, it is necessary to refer to various cash support measures under names such as the Investment Effect Adjustment Fund or the “000 Adjustment Fund,” as the term “cash grant” gives the impression of giving to investors for free. Obviously, as mentioned earlier, it is necessary to make sure that this is not a means of inducing preferential treatment or tax obligations because cash support is given depending on the degree of economic ripple effect. Unlike tax cuts, cash support programs are a means of generating financial losses from the government, meaning they require delicate operation.Another important trend in attracting foreign investment in developed countries is regulation on foreign investment. Most of the sanctions on foreign investment are imposed on the grounds of national security, but this is to prevent the outflow of technology such as high-tech industries from the host country. To this end, various means and systems are being created to strengthen the screening function for foreign investment and to prevent investment in certain cases. The United States basically had no restrictions on foreign investment, but recently strengthened foreign investment regulations through individual laws or state laws. The U.S. Foreign Exchange Regulation Act extends to all cases in which a company has the authority to determine major matters and to cases where the U.S. party does not have corporate control in acquisition of minority shares, acquisition of foreign companies in the U.S. and joint ventures. In addition, it imposes a high level of monitoring and obligation to report foreign investments for “all transactions related to core industries including important technologies and materials” with countries of special interest, such as China, but exempts companies that receive potential safe harbor letters.For national security, Japan is tightening regulations on foreign investment by strengthening regulations on foreign investment in designated industries (155 companies) and lowering the standard for pre-report ownership from 10% to 1%. Japan classifies three types of licenses for foreign investors and differentiates the criteria for reporting obligations according to the type of license. Pre-reporting industries and reporting conditions are being strengthened, but reporting exemptions are also being classified into comprehensive exemption and general exemption, according to the type of investor.The UK will introduce a mandatory reporting system in 17 high-tech industries with security risks and implement it from April 1, 2022. Acquisitions subject to report fall under the scope of civil and criminal penalties and fines if acquired without reporting, and even acquisitions not subject to report can be reviewed for up to five years after the acquisition.Since current Korean law has a weak legal basis for screening national security risks, it is necessary to supplement the foreign investment screening system from the perspective of economic security. New technologies, core infrastructure, sensitive personal information, and security screening targets need to be expanded from the perspective of stabilizing the supply chain, and countermeasures for pre-reporting, follow-up management, and reinvestment of private equity funds under the Foreign Investment Promotion Act need to be supplemented. Foreign investment in listed companies in Korea needs to be classified into companies subject to pre-examination and non-examination, and it is necessary to strengthen the evaluation criteria for economic and industrial impact assessment that will occur in the future, such as domestic market structure, market dominance, and technology and intellectual property level. It is necessary to strengthen the requirements for submitting information and data necessary for the examination of foreign investment, and to strengthen functions so that an effective security examination can be conducted by enabling integrated management and ex officio investigation. In addition, through continuous monitoring of foreign investment, preemptive responses from state-run banks and others are necessary even before problems occur, and the functions of the foreign investment committee need to be expanded and strengthened as in the case of advanced countries.
Japan’s Digital Transformation Policy and Implications for Korea
This study takes Japan's digital transformation policy as a research topic after the COVID-19 pandemic. The scope of digital transformation is relatively broad, such as digital government, digital transformation of in..
Gyupan Kim Date 2022.05.20ICT economy, Industrial policySummaryThis study takes Japan's digital transformation policy as a research topic after the COVID-19 pandemic. The scope of digital transformation is relatively broad, such as digital government, digital transformation of industries, and building of digital industrial infrastructure.First, the Japanese government's digitalization in the administrative field, that is, the digital government policy, focuses on regulatory reform in the public domain, standardization of information systems between the government and local governments, and regulatory reform in the private sector.There is a general recognition that Japan is lagging behind Korea in terms of digital government, but in the field of private use of public data, Japan has already enacted the ‘Public-Private Data Basic Act’ in 2016 and many local governments have established public-private data utilization promotion plans. In Korea, among the so-called '3 Acts on Digital Transformation' submitted to the National Assembly in June 2021, the ‘Data Basic Act’ can be highly evaluated in that it lays the legal foundation to promote the use of public data by the private sector. However, it seems that the work of building a public information data base like Japan's 'Base Registry' should be accelerated.In relation to regulatory reform, the Korean government needs to closely review the Japanese government's permit for telemedicine in the course of responding to the COVID-19 pandemic. The Japanese government's regulatory reform in the medical field is ahead of Korea's as shown in the permission of online sales of over-the-counter drugs in 2014.Second, this study analyzed the Japanese government's digital transformation policies and corporate trends in manufacturing, agriculture, and infrastructure and logistics sectors. The Korean government’s ‘Digital New Deal’ policy also emphasizes digital transformation in industrial fields such as smart industrial complexes, smart cities, and smart logistics systems, but in terms of policy directions and technological capabilities to pursue in each area, it is necessary to closely examine the Japanese cases to promote domestic distribution and dissemination.In the manufacturing sector, it is necessary to refer to the ‘Common Data Connecting Project’ supported by the Japanese government through pilot projects. At the corporate level, it is worth noting that Japanese manufacturing companies are focusing on industrial digital platforms by attracting related companies that go beyond factory automation to the entire supply chain. Japanese construction companies are also using digital platforms for remote management of construction sites as well as building management.Regarding the smart agriculture policy of the Korean government, it is necessary to pay attention to the Japanese government’s ‘Smart Agriculture Demonstration Project’. The Japanese government is implementing various pilot projects in a way that applies the so-called 4th industrial revolution-based technologies such as robot tractors, drones, sensors, cloud services, and AI to local agricultural field by establishing an public-private cooperation system.On the other hand, in the field of infrastructure and logistics, the Korean government also needs to actively introduce digital transformation work for urban planning like the Japanese government’s Plateau project. As of November 2021, 56 cities in Japan have developed large-scale 3D city models through the Plateau project, and in the future, use cases involving private companies will be developed in terms of the use of 3D city models to promote smart city development.Third, the digital infrastructure field needs to be approached from the perspective of economic cooperation between Korea and Japan. The Japanese government is focusing on supporting technology development in the post 5G mobile networks, but the weak competitiveness of Japanese companies in the field of 5G communication equipment provides room for Korea-Japan cooperation in the future. And, although the Japanese government is making plans to relocate its domestic data centers, there seems to be no way to hedge Japan's geopolitical risks such as earthquakes. From this point of view, the Korean government needs to consider ways to attract Japanese companies' data centers, just as it did immediately after the Great East Japan Earthquake in March 2011. Lastly, the Japanese government is also very active in fostering the domestic cloud service industry. Especially, the Korean government and companies need to be interested in the hybrid cloud system and super-decentralized cloud architecture that the Japanese government has designated as key support areas, and prepare a plan for cooperation with Japanese companies.
Analysis on Net-Zero Policy of Indonesia and It’s Implication for Korean Green New Deal Policy
While the international community has been engaged in dialogue on countermeasures to climate change by global warming, Indonesia, which ranked 8th in the world in Co2 emissions and top in ASEAN, has submitted its nati..
Jaeho Lee Date 2022.03.30Energy industry, Environmental policy Southeast Asia OceanSummaryWhile the international community has been engaged in dialogue on countermeasures to climate change by global warming, Indonesia, which ranked 8th in the world in Co2 emissions and top in ASEAN, has submitted its nationally determined contribution (NDC) targets of unconditional reduction of 29% and conditional reduction of 41% by 2030, and announced the net zero target by 2060. Indonesia is a core partner of Korea’s New Southern Policy and has been identified as a promising market for micro-grid projects in the K-New Deal Globalization Strategy, but as of yet no comprehensive strategy has been established that takes into account Indonesia’s net zero policy. To address this gap, this paper examines and suggests policy directions for cooperation with Korea’s Green New Deal, based on an analysis of Indonesian policies related to carbon neutrality and the current status of international cooperation in Indonesia.Indonesia had submitted a NDC target of unconditional reduction of 29%, conditional reduction of 41% by 2030, and has been implementing a series of policies in various areas, for example finance, technical assistance, capacity building, etc. Indonesia is coordinating its NDC targets and the local adaption and mitigation policies through the Long-Term Strategy for Low Carbon and Climate Resilience (LTS-CCR) 2050. In addition, a series of policies in the areas of environment protection, renewable energy, reforestation, and waste management had been introduced in the National Medium Term Development Plan (RPJMN) for 2020-2024. The National Energy Policy(KEN), which is the major initiative for Co2 emission mitigation, pursues to change the energy consumption structure by increasing the share of renewable energy instead of fossil fuels. The National Energy Plan(RUEN) is a set of multi-sectoral policies to implement the targets of KEN. The National Electricity Plan(RUKN) is the core plan of RUEN, in line with which the country has been implementing the structural change of national electricity generation by increasing the share of renewable energy(12%→28%) and decreasing the share of fossil fuels(60%→47%).Indonesia has been implementing various forms of multilateral and bilateral international cooperation to respond to climate change. Multilateral cooperation through the UNFCCC(UN Framework Convention on Climate Change) has been supported by major climate funds, such as the Global Environment Fund(GEF) and Green Climate Fund(GCF), while sectoral funds like the FCPF(Forest Carbon Partnership Facility), CIF(Climate Investment Fund) are supported by multilateral development banks. In this study, bilateral cooperation is analyzed using the Creditor Reporting System (CRS) ODA data of the OECD DAC. Japan took the top rank of major donors with a share of 53.6%, followed by France(14.9%), Germany(14.5%), the US(5.1%), and Australia(3.7%). The energy sector took the biggest share of 36.7%, followed by environment protection (21.3%), transport & storage(20.6%), agriculture & fishery(8.1%), etc. Physical infrastructure projects accounted for a major share of support from Japan and Germany, and administration and environment protection took the biggest share of support from France and the US. Support from Australia is relatively small in size, but covers various fields. In the case of Korea, Indonesia took the largest share of 77% of all its overseas afforestation activities, but did not produce recognizable mitigation achievements. Korea and Indonesia have been holding regular bilateral forums in the area of energy, and during the 12th forum held in 2021 the two countries focused on cooperation in the areas of renewable energy.In order to establish a policy toward achieving net-zero targets with Indonesia, Korea needs to prepare a cooperative approach based on analysis of Co2 emission status, net-zero policies, and international cooperation, etc. When considering the Land Use Change and Forestry(LUCF) accounted for the largest share (43.59%) of the total Co2 Emission in Indonesia, Korea needs to establish cooperation plans for the LUCF sector, such as the Reducing Emissions from Deforestation and Forest Degradation Plus (REDD+). In addition to bilateral cooperation in the REDD+, private-public cooperative platforms such as Lowering Emissions by Accelerating Forest Finance (LEAF) could provide further positive approaches for multilateral cooperation. Other multilateral cooperative mechanisms such as the ASEAN+3 or EAS would also be good channels for REDD+ cooperation. In the energy sector, emissions from electricity generation took the largest share (35%) in Indonesia, and the demand to develop renewable energy has been increasing for the energy mix conversion in the electricity generation sector. Considering the high demand for cooperation in renewable energy, the first step for energy cooperation between Korea and Indonesia would be solar and hydro generation. In addition to the electricity generation sector, the upstream and downstream linkage in the supply chain would create a synergy effect. To promote this synergy, developers should utilize financial linkages based on the basic characteristics of each project. Entering into PPP or purchasing contracts with local partners like power companies or institutions would be a positive approach to secure stable profitability. In transport sector, Korea and Indonesia have agreed to implement an EDCF project titled “EV infrastructure development project in Jakarta” from 2023. Korea also needs to expand the field of cooperation from physical infrastructure to the software and institutions to lead the EV ecosystem in Jakarta.
ТЕНДЕНЦИИ РАЗВИТИЯ КОСМИЧЕСКОЙ ОТРАСЛИ РОССИИ И ПЕРСПЕКТИВЫ МЕЖДУНАРОДНОГО СОТРУДНИЧЕСТВА В ОБЛАСТИ КОСМИЧЕСКОЙ ДЕЯТЕЛЬНОСТИ
Развитие космической промышленности во многом определяет технологический облик страны на международной арене. Приче..
Date 2021.12.30Russia EurasiaContentПРЕДИСЛОВИЕРезюмеК читателюВведениеРАЗДЕЛ I СТРАТЕГИИ РАЗВИТИЯ КОСМИЧЕСКОЙ ОТРАСЛИ РОССИИГлава 1. Формирование космической отрасли России и ее влияние на экономикуГлава 2. Современная стратегия России в области космической деятельностиГлава 3. Международная стратегия России в области космической деятельностиРАЗДЕЛ II АНАЛИЗ ПРОИЗВОДСТВЕННОЙ БАЗЫ И ПРЕДПРИЯТИЙ КОСМИЧЕСКОЙ ОТРАСЛИ РОССИИГлава 4. Анализ производственной базы космической отрасли РоссииГлава 5. Финансовый анализ деятельности предприятий космической отрасли РоссииГлава 6. Развитие рынка спутниковых космических услугГлава 7. Развитие рынка космического туризмаРАЗДЕЛ IV МЕЖДУНАРОДНОЕ СОТРУДНИЧЕСТВО В ОБЛАСТИ ОСВОЕНИЯ И КОММЕРЦИАЛИЗАЦИИ КОСМОСАГлава 8. Опыт и перспективы международного сотрудничества России в области освоения и коммерциализации космосаГлава 9. Анализ реализации совместных корейско-российских проектов международного сотрудничества в области космической деятельностиГлава 10. Оценка потенциала развития международных проектов Республики Корея и России в области космической деятельностиЗаключениеИспользованная литератураСписок сокращенийSummaryРазвитие космической промышленности во многом определяет технологический облик страны на международной арене. Причем, в эпоху IV-й промышленной революции крайне важную роль играет сфера «нового космоса», стимулирующая совместные космические проекты как на уровне государств, так и частного бизнеса.Уровень претензий на «новый космос» определяет и объемы финансирования развития космической отрасли. Поэтому не удивительно, что по расходам на космос, относительно объема национального ВВП в размере 0,24%, Россия фактически находится на 1-м месте. Более 0,2% от ВВП на эти цели может позволить себе на ряду с ней только США.Для подобной политики имеются серьезные технологические основания.Огромный исторический опыт работы по разработке космической техники, ее обслуживанию и эксплуатации – сильная сторона российской космической отрасли. Вторая особенность этого опыта в том, что по причине ее закрытости в СССР, инженерам отрасли приходилось создавать все образцы космической техники самостоятельно без зарубежных партнеров, однако в тесной кооперации с многочисленными предприятиями промышленности одной страны. В результате в России сформировалась широкая продуктовая линейка космической техники.Успешный опыт реализации многих космических программ на протяжении десятилетий также говорит о сильных сторонах России в данной сфере. Высокие стандарты качества изделий позволили выйти на мировой рынок космических услуг. Доказательство этому то, что практически каждый второй в мире запуск в космос в начале XX века осуществлялся российскими ракетами.Несмотря на очевидные преимущества российских изделий космической промышленности, очевидны слабые стороны космической отрасли РФ, на что постоянно обращают внимание руководство космической отрасли РФ и ее предприятий. Во-первых, это отсутствие конкуренции производителей. Во-вторых, устаревшая производственная база ряда предприятий. В-третьих, определенная зависимость от зарубежной компонентой базы (особенно при производстве некоторых спутников связи).Имеются и иные угрозы конкурентным позициям России в основании космоса.Это касается, прежде всего, рынка коммерческих запусков космических аппаратов, в том числе с отечественных космодромов. Ослабление позиций связано с переделом рынка за счет агрессивной ценовой конкуренции со стороны молодых космических компаний из США. Среди них можно отметить «SpaceX», за несколько лет переформатировавшей, казалось бы, сложившийся на долгие годы вперед рынок космических запусков.К направлениям нейтрализации перечисленных выше негативных тенденций следует отнести развитие международного сотрудничества при реализации космических программ и проектов; динамичное развитие технологий в смежных отраслях; рост спроса со стороны экономики на космические услуги. Движение по указанным направлениям не позволит России потерять занимаемые позиции. Этому также будет способствовать ориентация руководства страны на развитие космических технологий, гарантирующая финансовую поддержку отрасли из бюджета.Россия является продолжателем традиций еще советской космонавтики, проложившей дорогу в космос всему человечеству в конце 50-х годов XX века. Но времена меняются и многие технологии, которые были уделом избранных, постепенно распространяются по всему миру. Это требует изменения стратегии. По этой причине, в настоящее время руководством российской космической отрасли делается ставка на перспективные разработки в области космической энергетики. В частности, ядерной энергетической установки, являющейся ядром будущего межпланетного космического буксира «Зевс».Однако в условиях IV-й промышленной революции ориентация на собственные силы – ошибочная политика. В клуб космических держав входит все больше стран. И одна из них –Республика Корея.Совместная корейско-российская деятельность в области исследования и использования космоса основывается на общих стремлениях в государственной политике обеих стран и их технико-экономических возможностях. Если Россия способна осуществлять фактически любые виды космической деятельности, то Республике Корея это только предстоит. Но несмотря на ограниченный бюджет, выделяемый государством для KARI, в этой сфере наблюдается существенный прогресс. Например, Корея может гордиться достижениями в области спутниковых технологий связи и дистанционного зондирования Земли (ДЗЗ). Тем не менее, потенциал именно в «новом космосе» у страны огромный. Самое главное, что на волне IV-й промышленной революции эксплуатация космоса Кореей уже приводит к весьма позитивным результатам.Республика Корея зарекомендовала себя в целом как надежного партнера. Речь идет об организации подготовки и запуске первого корейского космонавта. Достаточно известен и проект первого корейско-российского ракета-носителя KSLV-I. Несмотря на серию технических сложностей, ракета достигла космоса, вывела макет спутника, и это позволило Корее на основе мощной производственной кооперации с Россией сделать уверенный самостоятельный шаг для разработки и запуска KSLV-II.Не прекращается сотрудничество между нашими странами и по услугам космических запусков.С 2003 года было осуществлено 23 космических запуска для вывода космических аппаратов, созданных в Республике Корея или по заказу корейских компаний, либо в кооперации с другими странами. При этом сотрудничество именно с Россией по числу запусков не только наиболее активное, но и не имеющее на своем счету ни одного аварийного запуска. Очевиден рост активности корейских заказчиков, намечаемый в предстоящем 2022 году на мировом рынке запусков. Ожидается рекордный 2022 год по числу запусков – 7. Можно отметить два самостоятельных запуска корейской стороной для отработки возможностей ракеты Нури с демо-спутниками. Не исключен первый космический запуск корейской частной компанией «Perigee Aerospace» ракеты “Blue Whale 1”. Россия запустит на ракете “Союз-2.1а” в 2022 году сразу 5 корейских спутников (CAS500-2 и 4 кубсата). В этом же году ожидается старт первой корейской лунной миссии.Окончание сотрудничества в области разработки средств выведения на орбиту значительно снизило уровень взаимодействия двух стран. Тем не менее, возможно сотрудничество в области разработки и коммерческих пусков легких и сверхлегких ракет, спутниковой связи, ДЗЗ, поставки компонентной базы, а также фундаментальных исследований космоса.Привлечение частного бизнеса к общим космическим проектам позволит увеличить их потенциал и снизить себестоимость за счет организации здоровой конкуренции. Поддержка же важнейших крупных проектов самими государствами снизит бизнес-риски.Успехи Кореи в реализации мобильных сетей 5G позволяют организовывать коммерческое обслуживание многих густонаселенных государств восточного полушария в кратчайшие сроки. В этом могут помочь российские геостационарные спутники. Они свяжут наземные зоны обслуживания 5G магистральными каналами без существенных вложений в инфраструктуру наземных коммуникаций. Россия также заинтересована в обеспечении мобильной связью и интернетом своих территорий, удаленных от оптико- волоконных каналов. Она реализует соответствующую федеральную программу. Однако наземное оборудование 5G в России только разрабатывается. Поэтому для России этот проект также актуален.Большинство современных разработчиков спутниковой связи отдают предпочтение низкоорбитальным спутникам. Планируется запуск сотен и тысяч аппаратов. А это позволяет говорить об ожидаемом взрывном расширении рынка услуг по производству спутников и их компонентов, а также о высоком спросе на пусковые услуги, по причине малого времени жизни спутников на низкой орбите. Космические аппараты на орбитах придется обновлять не реже одного раза в 5-7 лет.Группировка спутников, имеющая на борту космических аппаратов маршрутизатор и оборудование для межспутниковой связи, позволит иметь глобальное покрытие земной поверхности без необходимости иметь большое количество наземных ретрансляторов и волоконно-оптических магистральных каналов между ними. Перспективным видится организация оптической межспутниковой лазерной связи. Развитие совместного проекта по развертыванию космической информационной сети легко разделяется на несколько независимых с коммерческой точки зрения этапов. Каждый из них вполне самодостаточен.Корея и Россия имеет совместный интерес в Арктике. Он заключается в разработке больших запасов углеводородов и эксплуатации Северного Морского Пути (СМП). Энергетическая политика Кореи, основанная на водородных технологиях, требует ускорения решения вопросов получения доступа к большому количеству углеводородов. А СМП – это существенная оптимизация грузоперевозок. В обеих задачах Россия и Корея являются партнерами.Для осуществления хозяйственной деятельности в Арктике требуется обеспечение ледовой и геологической разведок на огромных территориях. Технологии ДЗЗ позволяют решить поставленные задачи наиболее эффективным способом. Особое предпочтение отдается радиолокационным спутникам, так как за полярным кругом имеются длительные полярные ночи, а климат Арктики характеризуется частой сильной облачностью. Оптическое ДЗЗ при таких условиях работает не эффективно. Объединив работу национальных радиолокационных спутников для решения поставленных задач, Россия и Корея получит эффективный механизм хозяйствования в Арктическом регионе.Возможна организация множества совместных проектов, связанных с пусковыми услугами. Важной задачей является удешевление пусковых услуг. Ее обеспечит многоразовое применение отдельных элементов конструкции ракеты и возвращаемого космического аппарата. Решенная техническая задача возвращения с орбиты тяжелого груза позволяет организовывать в перспективе производство в невесомости.Весьма перспективными могут быть проекты по очистке космического пространства от космического мусора и обслуживанию космических аппаратов на орбите Земли.Для решения фундаментальных научных проблем ученые и проектировщики Кореи могут присоединиться к международным проектам, в которых участвует Россия. Это, например, разработка и производство научных приборов для крупнейшей спутниковой астрофизической обсерватории «Миллиметрон» на базе космического аппарата «Спектр-М». Участие Республики Корея в Российско-Китайском проекте Международная Научная Лунная Станция (МНЛС) позволит на отличающихся от американского проекта «Артемида» условиях осуществлять исследование Луны. Тем более, что в настоящее время прорабатываются совместные американо-российские варианты взаимодействия при реализации МНЛС и «Артемида».
Determinants of Success and Failure of Green Parties in Europe
The Green Transformation that has begun before the COVID-19 pandemic is expected to continue to be a major economic policy of governments around the globe. Major European countries, especially the United Kingdom and Germany, along..
Dong-Hee Joe et al. Date 2021.12.30Energy industry, Environmental policy EuropeSummaryThe Green Transformation that has begun before the COVID-19 pandemic is expected to continue to be a major economic policy of governments around the globe. Major European countries, especially the United Kingdom and Germany, along with the European Union, are at the forefront of this transformation. However, electoral outcomes of political parties focused on climate change (i.e., Green Parties) differ significantly among these cases. Analyzing the reasons of their electoral success or failure can help understanding their role in climate-change policy. This, in turn, can teach how to make climate policy sustainable in Korea where political support for Green Parties is extremely low. We review the history of Green Parties in the UK, Germany and the EU and analyze the reasons for their success or failure. The related literature considers three major reasons for the extremely low electoral outcomes of Green Parties in Korea, namely the public’s attitude, electoral system and major traditional parties’ reactions. Following this, we focus on those three factors.To the concerned readers in Korea, the UK’s case shows, above all, that a substantial presence of Green Parties in the legislature is not a necessary condition for an active climate policy by the government. Instead, it emphasizes the importance of concrete commitments through legislation and institutionalization and wide consensus, including that of businesses, that the additional costs in the short run will result in net economic gains in the long run. The EU’s case shows that creating a platform on which interested parties of various types can actively participate in the discussion and formation of climate policy and putting more focus on “just transition” can be good starting points for achieving this consensus. For Korean Green Parties' electoral prospect per se, the German case hints at the needs to extend the scope and improve the competence of themselves.
Trade–Distorting Subsidies of the U.S. and the EU: What Can We Learn?
The Uruguay Round’s Agreement on Agriculture (AoA) categorized “domestic support” according to its presumed effect on trade. Subsidies that were deemed to be “trade distorting” were subject to limits specified in..
Jin Kyo Suh Date 2021.12.30Multilateral negotiations, Trade policy United States of America EuropeSummaryThe Uruguay Round’s Agreement on Agriculture (AoA) categorized “domestic support” according to its presumed effect on trade. Subsidies that were deemed to be “trade distorting” were subject to limits specified in member schedules. Domestic agricultural policies have been radically reformed in a number of countries, including the U.S. and the EU (European Union). This reform has been in the direction of reducing reliance on price supports in favor of direct payments.Both the U.S. and the EU have found ways to adjust policy instruments to appear to show trade-distorting support reduction even when incentives to producers are maintained. In fact, both countries had significantly reduced their trade-distorting supports (TDS) from the initial stage of agricultural subsidies reduction. For example, the TDS of EU decreased to 10.4 billion Euro in 2012 from 73.4 billion Euro in 1995, which is almost 86 percent reduction. Similarly, the TDS of the U.S. shows the continuous declining trend during the period of 1999~2008, $ 24.3 billion in 1999 to $8.5 billion in 2007.However, there was a sharp reversal in this decreasing trends of the trade-distorting agricultural subsidies during the period of 2010~2019. Both economies started to increase, at least maintain their TDS level from around 2008~2010. As a result, EU’s TDS increased in recent years from 11.0 billion Euro in 2010 to 11.8 billion Euro in 2018. Particularly, the TDS of the U.S. significantly was increased by 2.2 times, from $ 15.6 billion 2008 to $ 34.6 billion in 2019. What happened in both economies during the last decade?A close look to 25 years-historical data of agricultural subsidies in both countries shows very interesting aspects in terms of the reduction behavior of agricultural subsidies for the United States and the EU. Both countries would not reduce their TDS on certain agricultural products, which are regarded as ‘very sensitive’ goods in the viewpoint of their domestic politics: wheat, cotton, bananas, and grapes for wine in the EU and soybean, corns, cotton in the United States.It is also interesting that those sensitive products generally have a wide and huge harvested area in both economies. Wheat accounts for 45 percent of total grain production in the EU. Similarly, corn also account for 40 percent of total harvested area of grains in the United States. Thus, we can think about the possibility of connections between those sensitive products and rural society or rural communities that wheat or corn is mainly produced. In other words, the TDS for such sensitive products could be related to the non-trade concerns or non-economic role of agricultural production, which the AoA has already admitted the importance of it. For example, agricultural production can be a necessary condition in the rural development policy. Even if farm household income is guaranteed, if a certain amount of agricultural production is not achieved, living conditions in rural society will deteriorate unless the area is fully urbanized. It can be, therefore, said that it is necessary to maintain a certain agricultural production in the relevant area due to the introduction of sustainable rural and environmental policies along with agricultural subsidy policy.If this is true, then this finding has very meaningful implications on the reform of world agriculture as well as WTO agricultural negotiations, including future directions for agricultural subsidy policies of Korea. First, until now, prevailing view has been that the TDS such as price supports or deficiency payments should be reduced because they distort agricultural trade. However, from the subsidy policy experience of both the U.S. and the EU during the last two decades, we can infer that the certain TDS for sensitive products such as wheat in the EU or corn in the U.S., may be deeply related to the maintenance and development of rural communities from. This conjecture raises the question of whether certain flexibility should be allowed in some cases, rather than viewed as a bad subsidy that must be reduced unconditionally. That is, it is necessary to take a flexible view that some degree of flexibility can be granted in some subsides, even though they are related to agricultural production. At the same time, we need to have a question that the various non-economic roles of agricultural production have not been adequately addressed. In this respects, it is necessary to change the existing perspective on the TDS related to agricultural production, especially the TDS related to maintenance and sustainable development of rural area.Second, if there is a change in the existing uniform view of production-related subsidies, this may affect the current WTO agricultural subsidy discussion. It can be a step-stone to discuss how such TDS can be subject to the green box that is exempt to reduction commitments.Third, we can utilize our finding as a good leverage in the bilateral negotiations with the EU or the U.S. For example, we easily expect that the U.S. is primarily interested in exports of soybeans and corn, and also will have a deep interest on protecting cotton and sugar. Therefore, we can think of a strategy to protect our sensitive products by appropriately satisfying the U.S.‘ request for the item of interest or by requesting ambitious market opening for cotton or sugar.Finally, Korea's agricultural subsidy policy is expected to change from the TDS to a permissible green box subsidy policy. It is true that such a policy centered on green box subsidies is desirable in that it is market-friendly and has high transparency. However, as we saw at the subsidy reduction of the US and EU, it is necessary to properly utilize subsidy policies directly linked to agricultural production or prices, if necessary in the transition to green box subsidies from the TDS. The view that production-related subsidies are a problem is from the point of view of economic efficiency, and some TDS may be positive enough from the perspective of a non-trade concerns of agriculture.