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A Case Study and Strategic Insights for the GlobalExpansion of Chinese Electric Vehicle Battery Companies
Chinese EV battery companies, which dominate the Chinese domestic market, are recently entering global market in earnest. The demand for Chinese batteries is also rising as the demand for batteries increases due to the rapid pace ..
Jae Hee Choi Date 2024.03.27
economic security, energy industryDownloadContentSummary<Chinese EV battery companies, which dominate the Chinese domestic market, are recently entering global market in earnest. The demand for Chinese batteries is also rising as the demand for batteries increases due to the rapid pace of EV conversion in major automobile markets such as Europe and the United States. As the global market share of Chinese companies rises rapidly, the market share of Korean battery companies, which previously dominated the global battery market, is falling. As competition between Korea and China is expected to intensify in the global market in the future, it can be said that identifying the types and characteristics of Chinese companies’ global expansion and analyzing the strategies and competitiveness of major companies is essential to enhancing and maintaining the global competitiveness of the Korean battery industry.Accordingly, this study aims to examine the current status of the Chinese market and the global competitiveness of Chinese batteries, and to understand the characteristics of each type of global expansion of Chinese companies. In addition, I selected China’s leading EV battery companies to analyze their strategies and competitiveness, and consider comprehensive countermeasures that the Korean government and companies can utilize.In Chapter 2, to examine the development of the Chinese EV battery industry, I examines the Chinese market in terms of supply and demand, and identified the recent oversupply phenomenon that has emerged in the Chinese market. I also compared the level of competitiveness of the Chinese battery industry with that of Korea.First of all, in terms of demand, China is already the world’s largest EV battery market, and battery demand is expected to grow continuously until 2025, reaching more than 1TWh. In the Chinese EV battery market, the demand for LFP batteries compared to ternary batteries is increasing rapidly, and LFP batteries are used in 67% of Chinese EVs in 2023. On the supply side, CATL secures a majority of the market share in the ternary battery sector, and BYD and CATL occupy more than 70% of the market in the LFP battery sector. In addition, as the production capacity of batteries in China increases rapidly, the oversupply phenomenon in the Chinese market is intensifying. As a result, companies’ inventory pressure is increasing, plant utilization rates have dropped sharply, and some companies are experiencing deteriorating management, such as declining profit margins.I then looked at the competitiveness of the Chinese battery industry in terms of price and technology. Chinese-made batteries have a higher price competitiveness than the batteries produced by Korean companies, and the decisive factor is upstream competitiveness. In line with this, many Chinese EV battery companies have succeeded in achieving strong price competitiveness by vertically integrating them from upstream units, the Chinese government has come forward early on. China’s pursuit of technology competitiveness is also fierce. While Korea has not yet perfected LFP battery and cell-to-pack technology, China has a significant technology level in this field, and Korea no longer has super-gap technology in the ternary battery field. Chinese companies have aggressively invested in next-generation batteries such as all-solid-state and hold a large number of patents.In Chapter 3, the examples and characteristics of Chinese companies’ global expansion were examined. First, the types of Chinese companies accelerating their global expansion were classified into three categories: △ export expansion f exports in response to the increase in global EV battery demand △ local investment production in response to the battery supply chain internalization policy of major countries/regions △ transnational management using M&A.I have examined the characteristics of each type in the text, and first of all, found that the export expansion type is the most preferred way for most Chinese companies to respond to the demand in overseas markets so far by 2023. In particular, CATL ranks second in the global market outside of China through exports, and continues to narrow the gap with LGES, the No. 1 player. In the case of BYD, as exports of EVs expand, the usage of self-manufactured batteries installed in the vehicle body is increasing, and from October 2023, only batteries, not EVs, began to be exported alone. However, in the US market, it is expected that global expansion through exports will be limited due to discriminatory regulations such as IRA in the future. Next is the type of local investment production that has been promoted by a number of companies recently. Due to the rapid increase in demand for EVs in major automobile markets such as Europe and the United States, local production by automakers is in earnest, and in the process, automakers want to obtain a stable supply of batteries from a short distance. In addition, incentives for overseas production by Chinese battery companies are increasing as Europe and the United States are pushing for policies to internalize EV supply chains to induce batteries to be produced locally. Europe does not impose particularly discriminatory regulations on investment by offshore companies, including China, and EU member states such as Hungary are actively attracting offshore companies. As a result, many Chinese companies are actively planning to invest in Europe, and their total capacity plans in Europe exceed 300GWh in total. Like Europe, the United States wants to internalize the EV and battery supply chain , but the difference is that the U.S. wants to build its own capacity while excluding China as much as possible. The United States has defined all battery companies in China as FEOC. Despite these risks and costs in the U.S. market, Chinese battery companies have not completely abandoned their U.S. business, due to huge demand in the U.S. market and huge amounts of battery production subsidies supported by the IRA. Some Chinese companies, such as CATL and Guo Xuan Hi-Tech, are actively seeking alternative routes to enter the U.S. market. The third type is a method byin which some Chinese companies attemp transnational management by diluting China’s nationality through M&As. Guo Xuan Hi-Tech and Envision AESC are representative examples, and they seek to dilute a company’s nationality by trading shares with global automakers, and to expand global business by actively using the infrastructure, know-how, and networks that global companies already have. The two companies are the most active in investment production in the U.S. and Europe among Chinese companies, and global automakers are playing an important role in promoting overseas business.In Chapter 4, representative Chinese companies engaged in global expansion were selected and their specific strategies and competitiveness were analyzed. In order to select a company, I compared the indicators for global expansion, such as the global market share of Chinese companies, overseas sales volume, production plan in the US/Europe/ ASEAN, and whether global automakers participate in the investment. As a result, CATL and Guo Xuan Hi-Tech were selected as representative companies. CATL, China’s largest and best battery company, is expanding its business to global markets such as Europe, the United States, and ASEAN through exports and overseas investment production, regardless of battery types such as ternary and LFP. CATL has secured price competitiveness through vertical integration of the entire supply chain, especially from raw materials to recycling, and is rapidly expanding its global battery business with a powerful weapon called "bang for the buck" by improving technological competitiveness with the full support from the Chinese government and generous investment in R&D.Although Guo Xuan Hi-Tech does not have a large global market share outside of China, it is worth noting that it is the fastest-growing overseas business among Chinese companies, backed by its major shareholder, Volkswagen. Guo Xuan Hi-Tech has been researching and developing LFP batteries for a long time and is expanding its overseas business focusing on LFP. The company’s LFP battery competitiveness can be seen as the best in the industry in terms of energy density, and it was found that LMFP battery technology, called the next-generation version of LFP, has made significant progress. The ternary battery sector is currently being researched and developed with Volkswagen, so it is necessary to observe its achievements. Guo Xuan Hi-Tech is securing price competitiveness by self-procuring core materials, and is planning to build production capacity of cathode and anode materials as well as battery cell production in foreign countries such as the United States. In particular, the company has received substantial support from a number of local governments in China, and is actively cooperating with the government in the R&D field as well as tax cuts and subsidies.Based on these analysis results, the following implications were presented to the Korean government and companies.First, it is the implications for the Korean government. it is necessary to strengthen support for overseas businesses. In the future, the global expansion of Chinese companies is likely to be focused on overseas production rather than the existing mainstream export method. Korea also needs to expand its local production capacity, and since large-scale expansion requires huge funds, more active financial support from the Korean government is needed. In addition, it is necessary to devise measures such as strengthening lobbying activities so that Korean companies can continuously reflect the support benefits related to IRA manufacturing, one of the core interests of the U.S. business.Second, the Korean government should be more active in strengthening upstream competitiveness because private sector capabilities are not enough. To this end, it is necessary to reorganize the relevant legal system to foster the Used battery industry in the short term, and to accelerate the establishment of an integrated management system for Used batteries that is currently being promoted. Additionally, from a mid- to long-term perspective, it is possible to increase diplomatic efforts with resource-bearing countries and actively utilize multilateral channels such as IPEF to strengthen the ability to respond to supply chain crises.Third, as a basic way to prepare for competition with China, support for securing design and material technology should be strengthened. In particular, since securing precursor-related technology and manufacturing base is an urgent task to be carried out, the government can establish a specialized precursor education institution, and the government can also establish a precursor company to support development, production. In the mid- to long-term, investment in basic science research should be expanded to secure core patents. It is necessary to actively utilize multilateral channels such as IPEF to strengthen cooperation with international standards and regulations related to batteries so that our technology can be expanded and applied worldwide.Fourth, if our company is subject to discriminatory regulations abroad, we should also be able to take corresponding measures against companies in that country in accordance with the principle of reciprocity, and furthermore, we need to actively protect and foster our battery companies and industries within the scope of international regulations. In situations where regions/countries such as the United States, Europe, India, and ASEAN are promoting internalization of supply chains, there is a possibility that our company will be disadvantaged at any time. Our government also needs a map for emergencies, and we need to consider policy development based on the principle of reciprocity and ways to protect our companies.Next, it presented implications for our company. First, it is necessary to actively utilize the IRA’s FEOC guidelines announced in December 2023 as leverage for public cooperation. In a situation where Korean battery companies are highly dependent on China in the upstream sector, gradual diversification of supply chains is more realistic than a sudden ‘De-Sinicization’. In the short term, the ‘less than 25% of China’ clause can be used to establish joint ventures with Chinese companies in Korea, which is expected to greatly contribute to the stabilization and internalization of the supply chain of Korean companies in the midium to long term.Second, it is necessary to prepare countermeasures related to environmental regulations in Europe. As we have seen in the text, Europe is strengthening environmental regulations through the Battery Act. In order to cope with the regulations on carbon footprints, it is necessary to establish a system that can manage carbon emission-related calculation information, measurement standards, verification and monitoring in the upstream sector that depends on China. In particular, since most of the carbon emissions in the entire battery manufacturing process (LCA) occur in the upstream sectors such as raw material mining and refining, and the proportion reaches 50-70%, it is urgent to prepare countermeasures.Third, it is urgent to secure technology and manpower in vulnerable fields such as LFP. Since Korean companies have not yet mass-produce LFPs and it is unclear whether they can be more competitive than Chinese-made products, it is necessary to shorten the time by importing manpower, equipment, and materials from China and stabilizing and internalizing technology rather than developing everything related to LFPs on their own. additionally, since China is considered to be ahead of Korea in the fields of precursor manufacturing and battery recycling, it is also possible to consider ways to import key talents and know-how. -
Analysis of Major Agendas at the 13th WTO Ministerial Conference: Korea’s Perspectives
The WTO’s 13th WTO Ministerial Conference (MC13) will take place from 26 to 29 February 2024 in Abu Dhabi, United Arab Emirate. The Ministerial is expected to discuss follow-up agenda items from the 12th WTO Ministerial Con..
Euisik Hwang et al. Date 2024.02.20
economic integration, international tradeDownloadContentSummary<The WTO’s 13th WTO Ministerial Conference (MC13) will take place from 26 to 29 February 2024 in Abu Dhabi, United Arab Emirate. The Ministerial is expected to discuss follow-up agenda items from the 12th WTO Ministerial Conference (MC12), such as fishery subsidies, the e-commerce moratorium, whether to extend intellectual property rights exemptions to diagnosis and treatment for COVID-19, and WTO reform. In addition, there may also be an attempt to incorporate into the Investment Facilitation for Development (IFD) into WTO law. Additionally, the e-commerce Joint Statement Initiative (JSI) may also attempt to conclude the negotiations at MC13.Agriculture and development, traditional issues in WTO multilateral negotiations, are also expected to be discussed at MC13 regardless of whether there is an agreement or not. Finally, issues such as women and trade, climate change, and industrial policy (subsidies), which has recently attracted much international attention, are expected to be discussed at MC13.The direction of Korea’s negotiation response in preparation for MC13 can be summarized as follows. First of all, the possibility of reaching a consensus at MC13 must be analyzed first. In other words, since the negotiation period for a ministerial meeting is only 3 to 4 days, it is virtually impossible to reach an agreement through short negotiations unless the agenda is one in which the differences among member countries have been significantly narrowed in advance. Therefore, it is necessary to identify the possibility of reaching agreement on each agenda and to focus negotiating strength on those agendas on which agreement can be reached.From this perspective, the fisheries subsidies negotiations and the e-commerce JSI are agendas that have narrowed much of the differences between member countries through previous intensive negotiations. It is expected that most fisheries subsidies that contribute to overcapacity and overfishing (OC/OF) will be prohibited. In addition, Korea is likely to be amongst the 20 largest providers of fisheries subsidies, so it will be subject to additional regulations. However, there is still a big difference in the positions of major countries on special and differential treatments (S&D) for developing countries, including the notification issue of forced labor, so they may not be able to reach an agreement at the MC13. In the case of Korea, it is necessary to deal with negotiations in such a way as to postpone reaching an agreement until MC14 by uniting with other countries and highlighting the problems with the current draft text. In addition, in preparation for the future WTO fisheries subsidy notification, there is a need to closely review domestic fisheries subsidy policies and reclassify fisheries subsidies in line with fishery resource management policies.In the case of the e-commerce JSI, many of the key issues have been resolved due to the United Sates’ withdrawal of its original position. However, there are still issues, such as horizontal issues. In particular, whether or not to extend the moratorium on electronic transmission is a contentious issue that was difficult to reach agreement on at the previous MC12, and as some countries are still strongly opposed to extending the moratorium, it is expected that MC13 will also face considerable difficulties. Korea needs to engage to MC13 in a way that contributes to reaching an agreement on the e-commerce JSI. However, it is necessary to pay attention to the give-and-take compromise among major countries on whether to extend the moratorium in the final stage of MC13.As with other agendas, the positions of Member countries are sharply conflicting, so it is difficult to expect any particular outcomes from the MC13. The question of whether or not to extend the scope of intellectual property exemptions to COVID-19 diagnostics and treatments is important to substantially improve access to COVID-19 diagnostics and treatments in developing countries (including least developed countries). Therefore, it is necessary to temporarily support the expansion of the scope of the exemption, but make it subject to monitoring and evaluation by relevant international organizations to analyze its effectiveness.We have important interests at stake in WTO reform, so it is important to actively participate, but to accurately recognize our limitations by taking into account the characteristics of multilateral negotiations. In particular, the will of the United States has an absolute influence on the reform of the dispute settlement system (DSS). Therefore, it is necessary to handle negotiations in such a way that properly reflects the US interest based on the principle of a two-tired dispute settlement system with an appellate function. In particular, it is possible to propose a plan to use periodic review by the DSB(Dispute Settlement Body) or review by panel judges to keep appellate judges in check. Meanwhile, Alternative Dispute Resolution (ADR) such as good offices, arbitration, and mediation should be allowed for efficiency. However, considering the possibility of a favorable outcome for a powerful country, the possibility of going to lawsuit (panel, etc.) should be left open.Agriculture is a sharp conflict of interests among Member countries, so MC13 should focus on the specific content of the future work plan rather than the derivation of outcomes. In particular, the direction of future discussions on domestic subsidy reduction needs to focus on developing a work plan that meets our interests. As the conflict between developed and developing countries continues, it is unlikely that any results in development agenda will be achieved in MC13. In the case of Korea, it is necessar to be proactive in granting flexibility to the least developed countries (LDCs). To achieve this, it will be necessary to propose a plan to change the extension of benefits upon graduation from LDCs to a mandatory provision rather than a best-efforts clause.Regrading policy space, it is important to determine our position on the industrial subsidy of major countries. Korea ay provide subsidies to develop its own high-tech industries. Therefore, some flexibility is needed in the application of WTO subsidy provisions. However, rather than Korea's utilization, unfair competition due to the astronomical scale of subsidies provided by major countries (including developed countries as well as China and India) may be a bigger problem for Korea. Therefore, it is necessary to deal with industrial subsidies based on the principle of effective regulation rather than permission, but in the direction of providing an appropriate level of flexibility for each situation. To this end, an institutional mechanism needs to be established within the WTO that can focus on discussing and recommending relevant subsidy policies of Member countries. -
Refugee Protection Practices in 5 ASEAN Countries and Their Implications for South Korea
Recently, we have witnessed global refugee crises caused not only by armed conflicts and wars but also by climate change. The situation is as serious as they were when the international community adopted the 1951 Convention Relati..
Je Seong Jeon et al. Date 2023.12.30
ODA, economic cooperationDownloadContentSummary<Recently, we have witnessed global refugee crises caused not only by armed conflicts and wars but also by climate change. The situation is as serious as they were when the international community adopted the 1951 Convention Relating to the Status of Refugees (hereafter the 1951 Convention), requiring international cooperation and collaboration more than ever. However, the international responses have not been enough, even retrograde, to address the crises. For instance, refugee hosting countries, like Australia and the USA, used to provide resettlement opportunities for refugees over the long histories of immigrants, complying with the 1951 Refugees Convention. But now, even those countries are trying to evade refugee protection responsibilities. The indefinite delay of resettlement to the host countries, mainly in the global north, has led to a ‘protracted refugee situation’ in the accommodating countries in Southeast Asia, which reveals the limitation of the international refugee regime based on the 1951 Refugee Convention and the 1967 Protocol Relating to the Status of Refugees (hereafter the 1967 Protocol).The refugee issues demand international collaboration because it is related to people crossing the borders. That is why the international community realized the necessity to regulate the issue and formulated the international refugee laws, including the 1951 Refugees Convention and the 1967 Protocol, to share the responsibilities. Korea also has taken part in these efforts by ratifying the 1951 Convention and the 1967 Protocol in 1991 and legislating the Refugee Law in 2013 for the first time in Asia. In addition, the country has implemented a pilot program to resettle around 30 refugees yearly since 2015. However, there are many challenges to complying with international regulations and fulfilling responsibilities to protect refugees, as we noticed from the case of Yemen refugees claiming asylum in Jeju Island in 2018. Also, Korea has often been criticized for evading its fair share of refugee protection responsibilities due to its low refugee recognition rate, which is 2.8%.This study aims to suggest some implications for refugee policies to help the Korean government carry out its obligations as a sound member of the international community. In this regard, some ASEAN countries may provide good reference points with their decades-long experiences coping with refugee issues.Southeast Asia is a region both to be the origins of refugees and to provide accommodating space for them over the years. This two-sided situation has been developed due to the ‘open regional system’ based on its geographical and environmental aspects. The countries in Southeast Asia have been the origins of refugees in their histories. Their histories have evolved by combining the external pressure and internal dynamics from the traditional state-building process and colonization by the Western powers to independence movements. All these events have frequently led to wars and conflicts with their neighbors and/or within the countries. At the same time, Southeast Asian countries have provided shelters for refugees flowing in from the neighboring countries.In fact, from when we had no clear distinction between victims of disaster, displaced people and refugees, peoples in Southeast Asia have crossed the borders with much fewer restrictions. Although the modern state-nations have developed more strict distinctions based on peoples' origins and the borderlines, Southeast Asian countries have tolerated those moving into their territories and allowed their, though unofficial, integration. These Southeast Asian histories and experiences seem different from those assumed by the international refugee regime based on the 1951 Convention and the 1967 Protocol. Thus, we may need different perspectives to understand them. This study aims to highlight the lessons learned from some ASEAN countries' experiences, explore the implications of improving the Korean refugee policies, and search for the themes and methods of future collaborations with these countries.We select the countries for our study with a criterion: whether to ratify the international refugee laws. The first group includes those ratifying the 1951 Convention and the 1967 Protocol, which means they are expected to have institutional protection for refugees, complying with international standards to some extent. These countries could be used as reference points for Korea under similar conditions. The second group consists of the countries without ratifying either but allowing the refugee influx for decades. They provide ‘partial’ or ‘unofficial’ protection for refugees because they do not recognize the refugee status but permit the United Nations High Commissioner for Refugees (UNHCR), International Organization for Migration (IOM), and other local/ international NGOs to help refugees. We select five ASEAN countries, the Philippines, Cambodia, Malaysia, Thailand, and Indonesia, and put the first two countries into the ratifying group and the other three into the non-ratifying group.We use a comparative methodology, ‘contrast of contexts,’ to extract the implications of the refugee protection practices in the five countries with three variables, institution, geo-environment, and socio-political environment, reflecting the characteristics of the five selected countries. First, with the institution variable, we determine whether ratification of the 1951 Convention and the 1967 Protocol would provide any actual protection to refugees. Second, we use the geo-environmental variable dividing Southeast Asia into two, mainland (Thailand and Cambodia) and maritime (Malaysia, Indonesia, and Philippines), to understand the influence of the geographical location and environmental factors on the refugee issues. This variable helps explain the ways of the refugee inflow and outflow and the size and composition of the incoming refugees. The last variable, the socio-political factor, is selected to explore the relationship between the levels of democracy and refugee protection. We categorize Thailand and Cambodia as electoral authoritarianism and Indonesia, Malaysia, and the Philippines as electoral democracies. We also analyze what aspects of the political system may create differences in refugee protection practices. The political variable may affect the variety of actors, the autonomy of civil society, refugees' preferences, and local integration.The existing literature on Southeast Asian refugee issues mainly focuses on ratifying the 1951 Convention and the 1967 Protocol and criticizes the institutional weaknesses of refugee protection.Specifically, most studies are inclined to denounce the accommodating countries to control the refugee inflow with the immigration law, to regard their policies as defensive, and to depreciate the outcomes of the refugee-relevant practices in these countries. While the existing studies narrowly focus on the institutional protection the central governments provide, they ignore positive outcomes and achievements made by other actors, including local governments, international organizations, civil society, and refugee-led organizations. Our study wants to fill the gap by exploring the practices of refugee protection carried out by various actors, both governmental and non-governmental, by overcoming the weaknesses of regulations and policies through interaction.Chapter 3 presents the essence of our study, investigating the refugee situations in the five countries and analyzing the refugee protection practices of different actors and their implications.Thailand's geographical location has made the country most susceptible to refugee crises caused by the events in the neighboring countries. Especially during the Indochina War, the country formed a primary policy direction in responding to the refugee crises, summarized as ‘humane deterrence,’ which Thailand has maintained until now. In 1979, when the country had the refugee influx from Cambodia, the Thai government enacted an immigration law, defining anybody entering the country without the government's permission as ‘an illegal immigrant.’ It has become the basic approach of the Thai government to apply not only to refugees from the Indochina War but also to any refugees arriving later, including massive inflow from Myanmar. However, in reality, the Thai government has accommodated around 100,000 Myanmar refugees in 9 refugee camps scattered along the Thai-Myanmar border and provided shelter by conniving the countless Myanmar people without refugee status to live as undocumented immigrants in the Thai territory. Even though the country did not ratify the 1951 Convention, she has the constitution and other domestic laws to be used for refugee protection while ratifying several international human rights laws to provide legal space for complementary protection. In addition, the country has allowed unofficial protection to be provided by international organizations, including UNHCR and refugee-supporting NGOs. In response to the prolonged Myanmar refugee situation, the Thai government formed the Provincial Admission Boards in the provincial governments to support the registration of qualified refugees for the third country resettlement program implemented by UNHCR, the USA and other Western countries in the mid-2000s. Also, the Thai government has provided medical services and education through various non-governmental actors' activities, including Mae Tao Clinic. In summary, while Thailand has insufficient institutional protection at the national level, the country has provided various complementary protection.Malaysia has hosted the most enormous number of refugees in Southeast Asia. In 2022, the country was recorded to host 134,554 refugees from various origins, including those out of Southeast Asia and neighboring countries such as Myanmar, from which refugees passed through Thailand. The Andaman Sea Crisis of Rohingya in 2015 became a turning point in Malaysian refugee policies. Since then, the Malay government has allowed Southeast Asian refugees to stay temporarily in its territory until durable solutions for refugees are made. Recently, the refugee influx due to the military coup in Myanmar has increased the work burden of UNHCR, which has been the leading actor in determining the refugee status and protecting them, resulting in the deteriorating situation of refugees. Similar to Thailand, Malaysia has an immigration law to control refugees, thus leaving refugees without any legal status and making refugees vulnerable to arbitrary detention and deportation as illegal aliens.When a country does not ratify the Refugee Convention, we may appeal to international human rights laws for complementary refugee protection. However, Malaysia ratified only three core international human rights laws: the Convention on the Rights of the Child, the Convention on the Elimination of All Forms of Discrimination Against Women, and the Convention on the Rights of Persons with Disabilities. Even worse, the country made several reservations for each Convention, resulting in watering down the laws. Nonetheless, it is crucial to recognize that the country has allowed various international organizations, national agencies and civil society to promote the refugees' rights in alternative ways. In addition, recently, the Malay Prime Minister has taken more positive steps related to the refugee issues, such as using the term ‘refugees’ to refer to those who would be called ‘illegal aliens’ and urging cooperation and collaboration of Southeast Asian countries over the issues.Moreover, there was a significant legal case in February 2023 about refugees' worker rights. A refugee worker brought a case of unfair dismissal and wage delay to the Industrial Court of Malaysia and received a favorable verdict. The victory was regarded as an official recognition of the rights of refugees as workers for the first time. The case was a part of the legal progress and achievements for refugees and other social issues, such as the death penalty and women's and minorities' rights, through legislation and court cases during the first half of 2023. The Malaysian experiences suggest an important lesson that enhancing democracy in a society may be as crucial as the international refugee regime in order to improve refugee protection.Indonesia also did not ratify the refugee convention or the refugee law. The country has used the immigration law to deal with refugee issues. These facts may attribute the country seemingly to having very weak refugee institutions. However, contrary to the strict official position, the government has implemented refugee policies based on tolerance and co-existence. Mainly, the government has provided partial or informal protection by collaborating with international and local organizations working for refugees. These groups include UNHCR Indonesia, IOM, Jesuit Refugee Service Indonesia, SUAKA, Human Rights Working Group, and Amnesty Indonesia.In addition, Indonesia ratified several international human rights laws, which can be used to advocate complementary protection for refugees. Also, in 2009, the country contributed to forming the ASEAN Intergovernmental Commission on Human Rights (AICHR) and became the only country to appoint a human rights activist as its representative. AICHR is a body that copes with human rights issues that ASEAN may not officially cover. Thurs, it can work on refugee issues.Historically, the Philippines has accepted refugees from various origins both in and out of Southeast Asia. The refugee history could date back to 1910 when White Russians escaping from Russia flowed into the country after World War I. Since then, the country has opened its door to refugees around the world nine times more and ratified the Convention and the Protocol in 1981, earlier than many other countries. Also, the country accommodated around 300,000 refugees from Vietnam, Cambodia, and Laos during the Indochina refugee crisis.Also, the country installed the refugee status determination system in 1988 for the first time among ASEAN countries. The Refugees and Stateless Persons Protection Unit under the Ministry of Justice introduced the procedures to determine the status of stateless persons in 2012, which are closely related to refugee status determination. Furthermore, the government enacted ‘the Rule on Facilitated Naturalization of Refugees and Stateless Persons’ in March 2022, the first case in the world for the judicature to lead the simplification of the naturalization procedures of stateless persons.In addition, some of its cities have participated in the UNHCR campaign of Cities #WithRefugees since 2019. This is one of the examples of local governments taking part in the international initiative for refugee protection. In the campaign, 13 Philippines cities have signed the statement of solidarity together with more than 250 cities worldwide, pledging to support refugees and promote inclusion. In August 2023, the Philippines continued to respect international standards, including joining the ‘New Transit Agreement.’ However, despite its efforts, the number of refugees in the Philippines was only 856 in 2022. It may mean that the institutionalization of refugee protection may not be enough to protect refugees.Once Cambodia was one of the origins of mass refugee outflow during the Indochina refugee crisis, the country ratified the Refugee Convention in 1992 following the Philippines, and all nine core international human rights laws closely related to refugee protection. In this regard, the country could be compared to the Philippines. However, the number of refugees staying in the country was only 24 persons in 2022, the majority of whom were Montagnard, the indigenous people from Vietnam Highlands escaping during the Vietnam War. In addition, even after the new government was set up through the 1993 election, the country has struggled with its domestic issues, including massive Internal Displaced Persons (IDPs) resulting from internal political turbulence.Cambodia has a sound legal foundation for refugee protection both in general and in detail, with the constitution guaranteeing universal human rights and respect for international laws and with the 2009 enactment of a decree about the refugee status determination (RSD) procedure. However, especially the 2009 decree resulted in some negative outcomes. One of the most significant changes made by the decree was transferring the task of determining refugee status, which used to be done by UNHCR, to the Cambodian government. This change caused several problems. For instance, the RSD procedures have been considerably delayed, but there was no government support. This situation has increased the economic and psychological burdens of asylum seekers. Even worse, the Cambodian government has been criticized for using refugees for the country's economic gains. One such case was receiving tremendous aid from China after deporting Uighur asylum seekers to China in 2009. Another case was that the Cambodian government accepted 55 million Australian Dollars in return for signing an agreement about resetting Nauru refugees in Cambodia who initially tried to seek protection in Australia in 2014. To make matters worse, the country has no non-governmental actors except Jesuit Refugee Service Cambodia.The comparative analysis of refugee protection practices in the five ASEAN countries reveals that the three factors proposed in the research methods were valid. In particular, geographical factor such as geographical proximity is directly correlated with the high level of refugee admission in Thailand, Malaysia, and Indonesia. Besides, the socio-cultural characteristics of mainland or island Southeast Asia also have varying effects on different countries. For example, the official religion of Malaysia, Islam, which is considered a characteristic of island Southeast Asia, plays as a pulling factor in drawing Muslim refugees into the country, including the Rohingya people from Myanmar.It was also found that the economic condition of host countries is a significant factor. This claim is supported by the massive flow of refugees heading to Malaysia and Thailand, the two largest labor-importing countries in the region. Conversely, the economic factor also explains why the Philippines and Cambodia host a minimal number of refugees, although they are the signatories to the refugee treaties to some extent. Refugees tend not to consider the two countries as their final destination since the states provide minimal opportunities for refugee employment.Economic factor provides valuable insights for understanding the prolonged refugee crisis in Southeast Asia. Given the significant delay and uncertainty of resettlement to the third country, refugees are more likely to move to host countries with relatively stable livelihoods. Refugees would prefer host countries that tolerate their presence to some extent over countries where employment opportunities are scarce- although the tolerance is entirely driven by the state's economic necessity. This finding seems to be valid in the cases of the five ASEAN countries analyzed in this study. Importantly, however, from the perspective of refugees risking their lives to escape their home countries, it is likely that their ultimate goal is not just to save their lives. Refugees are looking for places where they can not only economically survive but also live with the fundamental rights and dignity they are entitled to as human beings. This understanding draws our attention to the relationship between refugee protection and democracy. Comparing the level of democracy in the five ASEAN countries supports this assumption.This study devised a comparative framework to distinguish between Thailand and Cambodia as the countries with an electoral authoritarian regime and Malaysia, Indonesia, and the Philippines as the countries with an electoral democracy. This analytic frame was based on the idea that all the countries under study have electoral systems. However, in cases where authoritarian rule is strong, the effectiveness of these systems may be limited. However, this framework does not adequately explain the large-scale refugee movement towards Thailand. In this study, therefore, the role of democracy in refugee protection in each state was examined not only based on electoral systems but also by using various components of democracy. The analysis of democracy and freedom in the selected countries shows a significant relationship between the level of democracy of host countries and their refugee protection. The democracy factor was particularly useful in explaining the poor refugee protection in Cambodia, which has the lowest democracy index among the five countries assessed in this study. Protecting refugees is critically challenging in a country where political activities to hold ruling parties accountable are suppressed, and civil society advocating for the rights of minorities is absent, even if they all have the electoral system.Although countries like Thailand, Malaysia, Indonesia, and the Philippines are often categorized as “flawed democracies,” their civil societies are active in refugee protection, and refugees living in those countries are also actively engaged in seeking their rights instead of remaining passive recipients of protection. Considering those cases, it is likely that the level of states' refugee protection improves with the level of democracy of the host country.Building upon the comparative analysis of refugee protection practices in the five ASEAN countries, the following section explores some implications both for the Korean government and civil society in three aspects: for the refugee policies; for foreign policies; and for international solidarity of civil society.1) Implications for the South Korean government's refugee policiesThe cases of the five ASEAN countries highlight the importance of establishing and strengthening collaboration between central governments and local authorities for refugee protection. In the case of Thailand, while it does not have a national-level refugee status determination process, it has created ‘local reception committees’ instead and allows local governments to assess the eligibility of refugees and grant them refugee status. Similarly, the Philippines published a Memorandum Circular on Local Government Assistance for Persons of Concern (POCs)' to strengthen local government's responsibilities and autonomy in refugee protection. The example of UNHCR's campaign, #WithRefugees, which involves 13 local cities in the Philippines, demonstrates that a country can provide meaningful support for refugees when local cities and communities voluntarily and actively engage in refugee protection. Ensuring autonomy for local governments in designing and implementing refugee policies is an important first step. However, it is also worth learning a lesson from Indonesia's failure. The case suggests that simply passing the responsibility to the local government without providing adequate funds and guidelines can burden local communities and lead to failure in refugee protection. Therefore, granting autonomy to local governments while simultaneously developing guidelines to enhance awareness and mutual respect for refugees, as well as providing appropriate incentives to the host communities, can be a way to address these challenges effectively. This approach strikes a balance between the central and local governments needed for an effective response to refugee protection.Furthermore, as 2024 marks the 10th year of South Korea's resettlement pilot program, it is necessary to expand this initiative and make it a permanent policy. The country should consider enhancing its resettlement and complementary pathways, starting with refugees who have a sound understanding of Korean society and present a high willingness to resettle in the country. Since 2015, the South Korean government has resettled approximately 30 refugees annually through the resettlement pilot program. From 2015 to 2017, this program focused on resettling Myanmar refugees who were residing in refugee camps in Mae Sot, Thailand, and from 2018 onwards, it included refugees living in urban areas in Malaysia. South Korea's decision to resettle urban refugees in Malaysia is based on the assumption that urban refugees making a living in the service sector may be in a situation similar to that of the Korean labor market. Indeed, urban refugees from Malaysia have demonstrated high economic self-sufficiency. These cases highlight the importance of understanding the environments familiar to refugees in making resettlement programs. While the pilot program has been successful to some extent, it has only accommodated a small number of refugees. The government should consider expanding the program.In recent years, accepting refugees through complementary pathways has gained significant attention as an alternative solution to the limited number of resettlement opportunities. Very recently, South Korea also has tried it by bringing qualified refugee students for education. In addition, the Ministry of Justice has implemented a complementary pathway program to connect qualified refugee workers to job placement. However, similar to the resettlement program, only a few refugees have enjoyed these programs' benefits so far. In addition, the job replacement program has provided limited types of jobs, restricting refugees with skills and high education from utilizing their full capacities. It would be helpful not to treat refugees as a homogeneous group but to assess their diverse backgrounds and experiences and provide job opportunities accordingly. This more personalized and flexible approach also can help complement the limitations of current migrant labor employment policies as well.2) Implications for diplomacy and international development cooperationThe Korea-ASEAN Solidarity Initiative (KASI) is a foreign policy initiative focusing on Southeast Asia as one of the Indo-Pacific Strategies made by the new government of South Korea. Unlike the previous administration's New Southern Policy, the KASI is characterized by its emphasis on values and non-traditional security. The “values diplomacy” stresses the values of freedom and human rights, which can be extended to encompass various issues, including refugee issues. The emphasis on non-traditional security can be a basis for a comprehensive approach to refugee issues, requiring international cooperation and global governance beyond the borderland. Therefore, it is necessary to make the refugee issue one of the foreign policy agendas in the framework of value diplomacy and non-traditional security diplomacy. The East Asia Summit (EAS), ASEAN Plus Three (APT), and other consultative bodies would be desirable for discussions related to the refugee issue in Southeast Asia.In order to alleviate the deepening refugee crisis around the world, it is vital to eliminate the root causes of refugees. Since refugees are generally more likely to originate in conflict or fragile states, it is crucial to reduce the causes of refugee outbreaks by leveraging international development cooperation programs for social stability and economic growth in conflict and fragile states. Along with this, efforts should be made to proactively accept and support refugees through policies and programs institutionalized by a cross-cutting approach and the Framework Act on International Development Cooperation and relevant degrees.In this context, the Korean government must also actively develop and expand international development cooperation programs to solve the refugee issues. Over the past decade, only a tiny percentage of the international development cooperation programs implemented by South Korea have been related to refugee issues. Recently, some donor countries have used official development assistance (ODA) programs to help the receiving countries with the massive influx of refugees. Korea should also consider utilizing ODA to raise awareness of refugee issues and establish mid-long-term strategies, including allocating in-donor refugee costs, enhancing multilateral cooperation through international organizations such as IOM and UNHCR, and strengthening organic collaboration between central and local governments.3) Implications for international solidarity of civil societyKorean civic groups began a new form of international solidarity movement in the 1990s and have focused on solidarity activities with Asian countries as a core element of international affairs since the 2000s. Protecting immigrants has been a crucial component of these activities in which refugees and asylum seekers were beneficiaries. In this context, civil society's international solidarity activities have been a significant aspect concerning refugee protection in South Korea. Despite its importance, only a small number of civil society organizations have been engaged in refugee protection activities. Among the more than 10,000 organizations registered in the government's Management Information System of the Non-Profit/ Non-Governmental Organizations (NPOs or NGOs), only 14 organizations claim to conduct refugee-related activities. Even these organizations mostly focus on assisting refugees residing in Korea but barely support refugees largely located in Southeast Asia and other areas. Considering the refugee situations in Southeast Asia, such as the increasing number of refugees, the prolonged waiting times, and the geographical importance of Southeast Asia as a stopover, more groups must work on refugees in the region. It may not be easy to increase the groups only focusing on refugee issues. However, it is more feasible for other groups to extend their coverage to include refugees in healthcare, education, environment, peace, women's, and human rights movements.Moreover, the Korean organizations working for refugees in Southeast Asia mainly have concentrated in some densely populated refugee areas such as Mae Sot in Thailand and Cox's Bazar in Bangladesh. As indicated by the trend of refugees entering Thailand but heading to Malaysia, refugees continue to move around in Southeast Asia and scatter to the various areas in the region. Therefore, Korean civil society needs to expand its geographic scope of activities in response to the refugee movement trend. Solidarity with local refugee support groups in the areas is one of the proper ways to overcome the limitations of human and financial resources. In addition, they should make efforts to find ways to leverage government financial resources. To this end, civil society organizations seeking to engage in refugee assistance activities need to clarify their identity as refugee assistance organizations and stand in solidarity with other like-minded organizations. This effort will increase the visibility of refugee protection activities, which in turn will increase the likelihood of categorizing refugee assistance as one of the government's policies of international development cooperation.It is also important for Korean civil society to note triangular cooperation in which refugee support organizations in the ASEAN countries are accustomed to working with international organizations and governments. Korean civil society organizations actively participate in the Asia Pacific Refugee Rights Network (APRRN) as part of international solidarity. However, in order to further increase the strengthening effect of solidarity, they should put an effort to encourage academia and UN organizations to be involved. In addition, they need to envision a multifaceted and comprehensive approach to refugee protection not only through legal and institutional channels, including refugee screening systems and human rights protection, but also by activating complementary pathways and collecting and evaluating refugee-related data. -
North Korea’s Tariff and Non-Tariff System: Implications for Its Integration into the International Economy
This study comprehensively analyzes North Korea’s tariff and non-tariff regimes and suggests the direction of North Korea’s tariff and non-tariff regimes in the process of reform and opening up. The purpose of the study is to an..
Jangho Choi et al. Date 2023.12.29
customs, North Korean economyDownloadContentSummary<This study comprehensively analyzes North Korea’s tariff and non-tariff regimes and suggests the direction of North Korea’s tariff and non-tariff regimes in the process of reform and opening up. The purpose of the study is to analyze North Korea’s tariff and non-tariff systems to reveal the direction of the North Korean authorities’ trade policy, the structure and characteristics of the legal and institutional framework, and to identify priority reforms for the country’s future integration into the international economy. This study differs from previous studies in that it is the first to quantitatively analyze North Korea’s tariff rates system.Chapter 2 examines the role of the legal system in North Korea and the history and purpose of the trade regime. North Korean authorities regulate tariff and non-tariff regimes through trade laws, customs laws, and tariff rate schedules. In North Korea, the guidance and policies of the Workers’Party take precedence over the law, but for the most part, the law governs the economy as a whole. North Korea’s customs law is similar to ours in that it aims to protect domestic industries, but it does not mention raising revenue through tariffs. In practice, however, North Korea’s tariff system appears to be used to raise revenue by absorbing foreign exchange held by private owners. One of the unique aspects of North Korea’s trade laws is that they are designed to ensure national security. This stems from the closed nature of the North Korean economy, which is designed to preventpolitical and economic influence from neighboring countries through trade, as well as the transmission of foreign cultures through imports and exports that could agitate the North Korean population and threaten the socialist system.Chapter 3 analyzes North Korea’s tariff rate structure and assesses its industrial protection and fiscal revenue effects. A key feature of North Korea’s tariffs is the low overall level of tariffs. The average nominal tariff rate was 5.5% and the average real tariff rate was only 4.6% based on the foreign exchange rate. Structurally, the tariffs have a sloping tariff structure with higher tariff rates depending on the level of processing, but the overall tariff level is still low enough to achieve the purpose of industrial protection. By product, the relatively high sloping rates on processed food and beverages and leather textile and haberdashery products in particular suggest an intent to protect light industrial consumer goods, but the tariff rate on these final products are not very high. While North Korea states that the purpose of its tariffs is to protect industry, there are many aspects of the tariffs that are inconsistent with North Korea’s 2005 industrial policy , known as the Military-first(Songun) Economic Policies. In terms of fiscal contribution, North Korea’s tariff revenue accounted for less than 2% of total fiscal revenue, suggesting that tariffs do not contribute much to the economy.Chapter 4 identifies policy and institutional factors that can be considered non-tariff barriers to the integration of North Korean trade into the international trade regime. The non-tariff barriers in the North Korean trading system can be broadly categorized into policy and institutional factors. Policy factors include the centralized governance system, the goal of building a self-reliant national economy, the qualitative strengthening of the national defense force, and the strengthening of the party-state system. To achieve, non-tariff measures arbitrarily restricted trade rights, items, and volumes. In terms of institutional elements, North Korea’s centralized trade system has identified a number of measures that can be perceived as non-tariff barriers in the entire process of trade, from planning, contracting, pricing, transportation, customs clearance, and payment. The role of North Korea’s non-tariff regime was to maintain the regime and implement state plans.Chapter 5 examines the historical changes in the tariff regimes of Vietnam and South Korea during their economic opening and development. Although South Korea and Vietnam had different economic systems before the reform and opening up policy, they experienced a similar increase in tariff rates in the early years of reform. The first increase in tariff rates occurred as a result of ‘tariffication’, where non-tariff barriers were converted into tariff policies, and the second increase in tariff rates for protected industries occurred as a result of the policy of differentiating tariff rates by industry sector for the purpose of industrial protection. In the early stages of North Korea’s trade system reform, tariff rates are naturally expected to increase as the country moves from a non-tariff to a tariff system, and tariff hikes to protect its industries are inevitable as it integrates into the international economy.Currently, North Korea’s tariff and non-tariff regimes are typical of Southeast Asian transition economies in the 1980s. Tariffs are low and fail to protect industries and raise government revenue, but the non-tariff barriers are high and serve to protect the economy. North Korea’s reform of its tariff and non-tariff regimes should consist of phasing out non-tariff barriers while raising tariff barriers to fill the gaps in trade regulations left by the removal of non-tariff barriers. To eliminate non-tariff barriers, the centralized trade administration system of trade should be abolished, the trade qualification approval system should be relaxed to limit trade to its own citizens, legal entities, and organizations, and the principle of building a self-reliant national economy should be revised to allow for integration into international value chains. In addition, North Korea’s unique logistics (transportation and ship-to-ship inspection) standards and inspection regimes, as well as trade payment methods should be harmonized with international standards. North Korea’s tariff rates should be systematically increased , with lower tariffs on raw materials and equipment in the early stages of reform, and higher tariffs on consumer and final goods. -
Analyzing the Prospects of U.S.-China Hegemonic Shift: Insights from Anglo-American Perspectives on Trade, Finance, Security, and Multilateralism
There has been extensive research on the possibility of the change of the hegemonic leadership between the U.S. and China. When we take a look back the history of the modern international relations, we can recognize that there hav..
Ihn-Hwi Park et al. Date 2023.12.29
international politics, political economyDownloadContentSummary<There has been extensive research on the possibility of the change of the hegemonic leadership between the U.S. and China. When we take a look back the history of the modern international relations, we can recognize that there have been specific leader countries who played leadership roles within each international structural stage. This means the previous experience of the leadership change between the U.K. and the U.S. should tell us some meaningful lessons to prospect the possibility of the leadership change between the U.S. and China. The research starts from this research question.Simply speaking, it is impossible for China to play the role of the U.S. in the areas of ① trade, ② global finance, ③ military security, and ④ multilateralism. Firstly in trade, most of the nations in the current international society pursue to maximize there national interests with the current liberal international trade order. Most of the nations never understand China should play a role to initiate the future international trade order in terms of value, institutions, leadership, and followership even with the many structural problems of the current trade order. Secondly, China, in particular, has not prepared a global financial leadership in the perspective of ‘gold-standard system’ which is one of the most critical preconditions for the global financial leadership. It is also interesting to know that the total volume of the US dollar in the global financial market has been smaller than before, and the same time the portion of the Euro and the Yen got larger, not the Chinese currency.Thirdly, militarily speaking, the military power of each country is the accumulated outcome of all the factors including economic power, operational capability, human resources, overseas military bases, hi-tech technology, etc. China is far behind the U.S. in the means of all of these factors. Especially, China is not able to use all the military resources only to face the U.S. due to the long border lines with two nuclear powers, Russia and India, and the vulnerability of the geographic conditions of the 14 neighboring countries. Lastly, the two countries may engage relatively a close competition to initiate each own-centric multilateralism. But the Chinese self-oriented principles and world view could be a critical barrier to expand the idea of China’s world order, multilateralism, mutual interests, etc. -
Merger and Innovation: Focusing on the U.S. Digital Platforms and Competition Policy
This study analyzes the impact of the large U.S. digital platforms such as GAFAM (Google, Apple, Facebook, Amazon, Microsoft) on their performance in terms of innovation and sales, focusing on their mergers and acquisitions (M&..
Gusang Kang et al. Date 2023.12.29
competition policy, 지식재산권DownloadContentSummary<This study analyzes the impact of the large U.S. digital platforms such as GAFAM (Google, Apple, Facebook, Amazon, Microsoft) on their performance in terms of innovation and sales, focusing on their mergers and acquisitions (M&A) activities targeting numerous small and medium-sized enterprises over the past 20 years. It also identifies ‘killer acquisitions’, where these platforms acquire innovative companies that could become potential competitors, thereby potentially reducing future market competition. The study provides insights and policy implications for the Korean Fair Trade Commission’s merger review process for digital platforms.Chapter 2 reviews the literature on the relationship between M&A and innovation and discusses the motives for M&A in the digital platform market, including ‘killer acquisitions’. Traditional M&A motives such as economies of scale and scope, acquisition of unique technologies or new distribution channels, and increased market dominance are contrasted with those in the digital platform industry, which include securing core assets like technology, processes, and intellectual property. Recent literature has raised concerns about ‘killer acquisitions’ that may reduce or eliminate future competition, although the definition of ‘particularly competitive future competitors’ and the limited pre-emptive merger policy pose challenges.Chapter 3 examines the types, characteristics, and status of M&As conducted by GAFAM, categorizing them into vertical, horizontal, and conglomerate mergers. Despite the unique characteristics of the digital platform industry, most M&As have been approved by the U.S. competition authorities. However, this has led to criticism of high market concentration. Recent arguments suggest the need to actively incorporate data characteristics in assessing the competitive restraints of M&A.Chapter 4 conducts an empirical analysis of the impact of digital platform M&A on firm performance. It examines how ‘killer acquisitions’ affect innovation performance, using patent applications and citations as indicators. The results show that killer acquisitions have a statistically significant negative impact on patent applications, suggesting potential negative effects on overall innovation performance. We also estimate the impact of digital platform M&A on the sales of both acquiring and acquired companies, and find revealing increased sales for the acquiring firms but decreased sales for the acquired firms.Based on these findings, Chapter 5 suggests the following policy implications: 1) using patent data and other metrics to evaluate digital platform mergers, 2) examining methodologies such as technology similarity indicators to identify killer acquisitions, 3) considering post-regulation rather than pre-regulation, and 4) shifting the burden of proof of market competition restriction from competition authorities to the digital platforms themselves. -
Proliferation of Industrial Subsidies: Current State and Its Implications
The recent trade environment has not been favorable for Korea. Since 2018, the U.S.-China trade conflict has intensified, leading to more protectionist tendencies globally, and since 2020, the COVID-19 pandemic has led major count..
Hyeyoon Keum Date 2023.12.29
trade policy, subsidyDownloadContentSummary<The recent trade environment has not been favorable for Korea. Since 2018, the U.S.-China trade conflict has intensified, leading to more protectionist tendencies globally, and since 2020, the COVID-19 pandemic has led major countries to build more resilient supply chains. As a result, subsidies have become increasingly important as a useful trade policy to address emergencies or market failures. But subsidies have the potential to distort trade and competition depending on who they target and how they are administered. And Korea, with its high trade dependence (96.8% as of 2022), can be particularly affected by the subsidy policies of its trading partners. However, the global proliferation of subsidies is likely to continue for the foreseeable future, and it is time to take a closer look at the current state of subsidy policies.In this study, I use statistics from the Global Trade Alert (GTA) database, which contains information on government intervention by country from November 2008 to April 2023, and the Corporate Subsidy Inventory, which contains information on subsidies only, to examine the status of industrial subsidies in detail. We also identify Korean industries that are associated with subsidies in major countries and analyze the trade changes of Korean industries before and after the implementation of industrial subsidy policies in major trading partners.During the analysis period, the number of industrial subsidy policies increased significantly globally. The number of subsidy measures increased from 92 in 2008 to 1,511 in 2021, with 147 policies announced in a four-month period in 2023. The country with the most industrial subsidy policies over the same period was China, with a total of 3,770, followed by the EU, the US, Canada, Japan, and India. Each of these countries' subsidy measures covered a wide range of products and industries and affected almost every country in the world, including Korea. Financial grants were the most common type of subsidy throughout the period, accounting for 35.9% of all measures, followed by trade finance and state loans. In addition, tax or social insurance reliefs and production subsidies have been increasingly announced in recent years.Subsidies were reported in various manufacturing sectors, with the most relevant industry being HS84 (machinery), followed by HS85 (electrical equipment), HS52 (cotton), and HS87 (automobiles). In addition, there were many cases of subsidies in industries such as optical and precision equipment, plastics, and steel. Since 2018, HS84, HS85, and HS87 have been the most frequently subsidized industries. Since these are mostly industries where Korea is competitive in the global market or has a high proportion of exports, the more widespead the subsidy policies become, the more likely it is that Korea’s export industries will be negatively affected.China, the EU, and the U.S. were the major countries that used industrial subsidies during the period analyzed, but the number of subsidy announcements, the types of subsidies used, and the sectors with many subsidies differed somewhat by country. Of these major countries’ policies, the share of policies affecting Korea was 96.7% in China, 56% in the EU, and 50.9% in the U.S. In China, automobiles, machinery, pharmaceuticals, and semiconductors were the most frequently subsidized products; in the EU, environmental machinery, chemicals, and plastics; and in the US, rechargeable batteries and semiconductors.Based on the industrial subsidy announcements made by major countries (China, EU, and US) since 2018, we identified 280 export items and 281 import items at the 6-digit HS code level that particularly affect Korea. Both exports and imports were dominated by the machinery, electrical equipment, and automobile industries, as is the case globally. The results show that exports to the rest of the world are increasing, while the share of exports to major countries is decreasing. These results suggest that industrial subsidies in major countries may have a negative impact on Korean exports to these countries. Meanwhile, imports from major countries grew faster than imports from the rest of the world in terms of the average annual growth rate over the 2012-2022 period. However, since 2018, imports from major countries and the world as a whole have grown at similar rates. However, Korea is a significant importer of items that major countries subsidize for their own companies, and if this situation continues, there is a possibility that domestic products may be replaced by imports from major countries.Based on the above analysis, this study suggests that the Korean government’s role in responding to the proliferation of industrial subsidies is to 1) lead international efforts to create a fair competitive environment, 2) expand channels of communication with major trading partners, and 3) establish effective policies to improve the competitiveness of Korean companies. -
Assessing ASEAN Economic Integration Progress and South Korea’s Approach: Focus on TBT and SPS
TBT (Technical Barriers to Trade) and SPS (Sanitary and Phytosanitary Measures) have two attributes. They act as barriers to trade expansion by protecting producers, but their importance has grown in terms of consumer protection m..
Sungil Kwak et al. Date 2023.12.29
economic integration, barrier to tradeDownloadContentSummary<TBT (Technical Barriers to Trade) and SPS (Sanitary and Phytosanitary Measures) have two attributes. They act as barriers to trade expansion by protecting producers, but their importance has grown in terms of consumer protection measures after the COVID-19 pandemic. Rather than eliminating related regulations, achieving harmonization within the ASEAN region can simultaneously serve two objectives: expanding trade between South Korea and ASEAN and improving consumer protection. We assess the level of regional economic integration by measuring regulatory distances among ASEAN member states. We also measure regulatory distances between South Korea and ASEAN, and between Japan and ASEAN. We estimate the impact of ASEAN’s TBT and SPS on the export performance of countries exporting goods to the ASEAN region. In addition, a survey of South Korean firms exporting goods to the ASEAN region is conducted to assess their difficulties and to evaluate South Korea’s support policies.Chapter 2 evaluates the economic integration efforts within the ASEAN region, focusing on TBT and SPS. In 2020, ASEAN conducted a mid-term assessment of economic integration and produced the “Mid-Term Review: ASEAN Economic Blueprint 2025” in 2021. According to the results, ASEAN has achieved 54.1% of the sectoral work plans, with the remaining 34.2% currently underway and expected to be achieved without major problems. The ASEAN recognizes the need for regional integration to overcome the poly-crises facing the global economy. ASEAN Comprehensive Recovery Framework (ACRF) views economic integration as a means of recovery from the COVID-19 pandemic and the associated poly-crises. As a result, intra-ASEAN trade and investment have increased steadily since 2021.A notable harmonization effort for non-tariff measures such as TBT and SPS in the ACRF is the development and application of the “Non-Tariff Measures Cost-Effectiveness Toolkit.” This toolkit encourages individual ASEAN member states to assess both the introduction process and the cost-effectiveness of their non-tariff measures, thereby promoting harmonization. Additionally, the “Framework for Circular Economy for the ASEAN Economic Community,” adopted by ASEAN in 2021, can be seen as an effort to harmonized regulations related to circular goods and services. While existing regulations in manufacturing sectors may require more time to harmonize because they are already in place, emerging sectors like circular goods and services can flexibly seek regulatory harmonization within the ASEAN region due to their ongoing establishment. By achieving standard harmonization and mutual recognition agreements for these sectors, South Korea and ASEAN can anticipate efficiency gains and regional integration, resulting in trade facilitation effects between the two regions.Furthermore, an analysis of TBT and SPS cases in Vietnam and Indonesia, key partners in the “Korea-ASEAN Solidarity Initiative (KASI),” aimed at assisting South Korean firms to enter the ASEAN region. Indonesia still faces issues related to certification and testing, including ‘halal’ certification. Vietnam, despite its high level of integration into the global economy as evidenced by its high trade dependence, has not implemented high-level TBT and SPS measures due to the low technological competitiveness of its domestic and indigenous firms. However, there are concerns about the transparency and adequacy of the implementation process. Capacity building is urgently needed in Vietnam and Indonesia to ensure the transparent use of SPS and TBT for public purposes.Chapter 3 first measured regulatory distances among ASEAN member states (AMS) from 2015 to 2018. During this period, it was observed that TBT and SPS regulatory distances among AMS increased, indicating a lack of regulatory harmonization within the ASEAN region. This can be attributed to the rapid economic growth, leading AMS to focus more on protecting their own citizens. It should be noted, however, that the data used in the study is only available up to 2018, making it impossible to compare with the more recent results. As discussed in Chapter 2, ASEAN has made harmonization efforts in response to the COVID-19 pandemic and poly-crises. Therefore, it is expected that regulatory gaps will decrease as the 2025 integration target approaches.Second, using Multidimensional Scaling (MDS), TBT and SPS regulatory distances between South Korea and ASEAN are found to be greater than those between Japan and ASEAN. When the average SPS regulatory distance index between South Korea, Japan, and ASEAN Member States (AMS) is plotted using MDS, South Korea is located further away from Japan and the AMS. This indicates that South Korea’s SPS regulations appear to be heterogeneous compared to those of Japan and AMS. Regarding TBT, except for Vietnam and Cambodia, Japan and the AMS are close to each other, while South Korea is far from the AMS. This result can be attributed to Japan’s historical contributions to ASEAN’s institutional establishment through the activities of ERIA and ADB. South Korea needs to actively participate in projects aimed at strengthening institutional linkages between South Korea and ASEAN, in particular, in emerging sectors like environmental and digital industries, in order to harmonize the SPS and TBT regulations in these new sectors.Third, industries in South Korea that are vulnerable to ASEAN SPS and TBT regulations, as selected by trade experts using the Analytic Hierarchy Process (AHP), include food, general vehicles, steel, boiler machinery, toys, and others. Regarding SPS, food products are found to be more significantly affected than animal and vegetable products, while concerning TBT, transportation, iron and steel, boilers and machinery, and toys are expected to be more affected.Fourth, in industries closely linked to global value chains, the regulatory distances of TBT are shorter, but the distances of SPS between South Korea and ASEAN are relatively longer. In the MDS analysis of TBT, the industries in which South Korea has a comparative advantage in the ASEAN region are located closer to AMS and Japan. This suggests that increasing regulatory similarity between South Korea and AMS will potentially accelerate regional integration through expanded trade. On the other hand, industries highly affected by SPS, such as meat and fish products, and fruit and vegetable products, are found to be far from South Korea and other AMS. This divergence can be attributed to significant differences in institutional arrangements in these sectors and income disparities between South Korea and the AMS.Fifth, the average regulatory index of TBT between South Korea and each AMS shows significant differences, particularly in high-technology industries such as chemicals and machinery. On the other hand, low-technology industries such as plastics/rubber and textiles/apparel have shorter regulatory distances of TBT on average. Therefore, it can be assumed that the likelihood of TBT-related problems affecting South Korea’s exports to the ASEAN region is low for low-tech industries like textiles/apparel and plastics/rubber. However, in high-technology-intensive industries like chemicals and machinery, South Korea’s exporters are more likely to encounter TBT-related issues. This finding is consistent with the previous AHP analysis.Sixth, countries classified as high-income nations, such as Singapore and Brunei, have shorter regulatory distances than South Korea. However, significant regulatory disparities are observed between South Korea and Cambodia, a low-income country. This aligns with previous research findings suggesting a higher degree of regulatory similarity among countries with similar income levels. Therefore, Singapore can be seen as a valuable focal point for South Korea to harmonize regulations with ASEAN member states.In Chapter 4, we first examine the current status and characteristics of non-tariff measures in the ASEAN member states using TBT/SPS notifications and Specific Trade Concern (STC) cases. We find three stylized facts. First, within the ASEAN region, continental countries have more TBT measures, while maritime countries have more SPS measures. This finding is particularly evident when considering only STC cases. The relatively higher-income maritime countries in the ASEAN region may have adopted more advanced measures due to their technological development. On the other hand, lower-income continental countries seem to adopt TBT and SPS measures later than higher-income countries, possibly because their economies have grown rapidly in recent years, allowing them to catch up with the measures introduced by advanced countries.It is expected that the economic impact of TBT and SPS will vary depending on the geographical, economic, cultural, and social differences between continental and maritime countries. Therefore, South Korea should formulate flexible strategies to address TBT and SPS in the ASEAN region, taking into account regional and country-specific characteristics.Second, the number of TBT/SPS notifications and Specific Trade Concern (STC) cases for primary processed products, as well as chemicals, and electronic equipment, has been on the rise recently. These industries are identified as vulnerable sectors for South Korea in Chapter 3 on ASEAN’s TBT and SPS measures. Therefore, South Korea needs to develop policies specifically for high value-added manufacturing. Considering that most ASEAN member states seek to promote the materials and parts industries of chemical and electronic equipment, there is a high likelihood that TBT/SPS measures for these industries will be strengthened within the ASEAN region.Third, in formulating policies for ASEAN non-tariff measures, we must consider our current economic situation. The extent of trade-restrictive and trade-promotion effects of TBT/SPS will vary depending on the economic conditions of the exporting countries. For example, if we look at the countries raising Specific Trade Concerns (STC) regarding TBT/SPS, we can see that for TBT, it is mainly advanced countries that raise concerns, while for SPS, both advanced nations and developing countries participate in raising the concerns.In chapter 4, we estimate the impact of TBT and SPS of ASEAN member states on the exports of 213 exporting countries to the ASEAN region from 1996 to 2021, using gravity models with fixed effects. The results of the estimation can be summarized into three main points.First, non-tariff measures in the ASEAN region do not significantly affect the exports of countries to Southeast Asia as a whole. However, exports from OECD countries are significantly negatively affected by ASEAN TBT measures, while exports from non-OECD countries are significantly negatively affected by ASEAN SPS measures. This is consistent with the fact that ASEAN TBT measures are primarily targeted at advanced countries, which is consistent with the stylized facts presented earlier. Moreover, it is evident that ASEAN TBT measures became a significant barrier to exports from advanced countries to the ASEAN region in the 2010s. This aligns with the stylized facts earlier that shows an increase in Specific Trade Concern (STC) cases raised by advanced countries regarding ASEAN TBT measures in the 2010s. Therefore, South Korea, as an OECD country, needs to focus more on developing policies to address TBT rather than SPS. That’s why, in chapter 5, we conduct a survey on TBT measures among Korean firms exporting goods to the ASEAN region.Second, SPS is found to be a significant barrier in the continental ASEAN countries. This is due to the fact that countries located in the continental part of the ASEAN region, such as Cambodia, Laos, Myanmar, and Vietnam, have relatively less advanced industrial structures compared to the maritime part. In the 2010s, TBT served as a significant trade barrier in the ASEAN maritime region. Given the relative development in the maritime region compared to the continental region, there is a significant potential for more active use of TBT measures based on technological advantages. Therefore, there is a need to pro-actively develop appropriate strategies for this situation. This finding aligns with local expert interviews, which indicated that it may be challenging for domestic firms to raise TBT to a high level in countries that are still in the process of development, such as Vietnam.Third, overall, it is revealed that ASEAN’s TBT and SPS measures do not significantly affect intra-ASEAN trade. However, they did have a statistically significant impact on intra-ASEAN trade negatively in the 2010s. This aligns with the findings from the stylized facts presented earlier, which showed the emergence of TBT and SPS-related STCs among ASEAN Member States (AMS) in the mid to late 2010s. Furthermore, it aligns with the results from Chapter 3, which indicated that the regulatory distances between AMS widened from 2015 to 2018. This suggests that regulatory harmonization and standardization will be crucial for the expansion of intra-ASEAN trade in the future ASEAN economic integration process. In fact, ASEAN’s efforts for regulatory harmonization and standardization have been ongoing, especially since the COVID-19 pandemic, as confirmed in Chapter 2.Moreover, given the high similarity between AMS’s regulations and institutions and those of Japan, South Korea, which aspires to be a global pivot state, should actively engage in improving AMS’s regulations and institutions, particularly in emerging sectors such as the digital economy and environmental goods within the ASEAN region. Such efforts can enhance not only trade but also South Korea’s standing in the international community.Chapter 5 collected opinions through surveys of South Korean manufacturing firms exporting goods to the ASEAN region. The surveys aimed to gather insights on TBT-related challenges, areas requiring improvement, the similarity of TBT by ASEAN member states/region, evaluations of support policies, and additional support policies. The survey results can be summarized into the following five points.First, the impact of TBT varies depending on the characteristics of the firms. As noted above, TBT generates both trade-restrictive and trade-promotion effects. Among the firms that participated in the survey, 57.2% identified the excessive increase in compliance costs due to TBT as the most significant obstacle. Lack of Information and technological deficiencies were also mentioned as challenges. On the other hand, other responding firms, not considering TBT as an obstacle, reported TBT’s positive impacts, such as enhancing their sales and export capabilities, increasing consumer trust in their products, and improving the dissemination of market information. Therefore, when policy-makers formulate support policies for the firms, it is important for them to recognize that the impact of TBT varies across the characteristics of the firms. Additionally, it is crucial for policy-makers to provide related information and best practices where TBT is helpful in promoting exports to the ASEAN region, particularly to small and medium-sized enterprises.Second, South Korean export firms face the most significant challenges in obtaining certifications related to TBT. In the survey, firms identify “lengthy certification acquisition time” as the biggest challenge of TBT to overcome when exporting to the ASEAN region. In addition, they express difficulties related to unclear regulations, uncertain certification procedures, lack of alignment with international standards, and significant burden of certification acquisition costs.Third, despite ASEAN’s efforts to harmonize regulations, differences in TBT between the continental and maritime regions persist. ASEAN has launched the ASEAN Economic Community, aiming to create a “single market and single production base” by the end of 2015. As mentioned in Chapter 2, with the completion of the ASEAN Free Trade Area (AFTA), six advanced ASEAN member states (Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand) have already achieved a 99.29% of tariff line coverage, while the four less advanced ASEAN member states (Cambodia, Laos, Myanmar, and Vietnam) have achieved 98.64% of tariff line coverage for intra-regional trade.Efforts were made to harmonize TBT/SPS through the ASEAN Comprehensive Recovery Framework (ACRF), which was launched in November 2020 with the aim of eliminating non-tariff measures in the region and achieving ASEAN integration. However, disparities in TBTs still existed between the continental and maritime regions and varied across countries. More than half of the firms surveyed indicated that TBTs among ASEAN member states still differ significantly. In particular, the survey results showed that responses indicating significant differences between TBT in the continental and maritime regions accounted for more than half of all responses. This finding is also confirmed by the results of the quantitative analysis in Chapter 4.Fourth, there is a need to expand access to government support for TBT. The survey on firms’ awareness and use (including future plans) of government support policies related to ASEAN TBT compliance shows that although firms are willing to use the support policies, they often do not use them due to a lack of awareness. This is why, despite South Korea having a systematic TBT response system centered around the Korean Agency for Technology and Standards (KATS), firms expressed that government support policies related to TBT are still insufficient. However, the good news is that the majority of firms responded that government support is helpful in solving problems. In other words, if firms receive government support when needed, they can minimize their losses. By enhancing promotional activities for TBT support policies, including seminars, consulting support, and educational materials, firms are expected to make better use of government support policies.Finally, concerning TBT, South Korean firms emphasize the importance of monitoring changes in foreign government regulations, promoting the internationalization of technical standardization projects, and supporting the expansion of Korean testing and certification institutions abroad. Since obtaining certification is the biggest challenge for these firms, they advocate for simplifying the certification acquisition process, streamlining certification requirements, standardizing country-specific certification procedures, and expanding testing institutions. Collaboration with ASEAN member states (AMS) is seen as a key way to achieve these goals. Simplifying and standardizing ASEAN’s TBT procedures would not only facilitate trade between South Korea and AMS but also contribute to the overall economic integration of ASEAN.Based on the research results above, this study presents four policy directions:1. Strengthening Collaboration for Regulatory Harmonization in ASEAN: It is essential to strengthen cooperation for regulatory harmonization with the ASEAN member states (AMD). The local scholar meetings held in Vietnam and Indonesia also stressed the need for capacity building among officials responsible for TBT and SPS in the ASEAN region. As future trade between the two regions is expected to revolve primarily around high-tech industries, proactive efforts are needed to harmonize technical regulations. This will help reduce regulatory disparities between the two regions. As seen earlier, ASEAN’s regulations for traditional manufacturing industries were already similar to Japan’s. South Korea should focus on regulatory harmonization in emerging sectors such as the digital economy and environmental industries.2. Consideration of a South Korea-ASEAN Joint Certification Center: The second policy direction is to consider the establishment of a joint South Korea-ASEAN certification center to facilitate flexible responses. This is crucial because the impact of TBT/SPS on exports may vary by product, time, and country. The study’s results highlight the regulatory differences between the maritime and continental parts of the ASEAN region, which affect South Korea’s exports to the region differently. By setting up an ASEAN-based certification center, with Singapore as a potential hub due to its closest regulatory distance to South Korea, and by strengthening the network with other ASEAN member states, more flexible responses to changes in AMS’s TBT/SPS measures can be achieved. The survey results in Chapter 5 also support the establishment of a Joint Certification Center.3. Proposal for the Establishment of an ASEAN Integrated Standard Accreditation System: The third policy direction proposes the establishment of an ASEAN Integrated Standard Accreditation System. This is a challenging proposal, given the diverse geographical, economic, social, and cultural characteristics of ten ASEAN member states. However, it could be piloted initially for universal safety standard requirements for electrical and electronic products or for new products without established regulations. If successful, it could be gradually expanded. The creation of a working group for this purpose, with South Korea’s participation, could promote regulatory harmonization between South Korea and the ASEAN member states.4. Strengthening the Interconnection among the National Trade Repositories of 10 ASEAN Member States: The fourth policy direction highlights the need to support the strengthening of linkages between the National Trade Repository (NTR) of 10 ASEAN Member States (AMS) and the ASEAN Trade Repository (ATR). A Trade Repository serves as an information repository that collects information on each country’s tariff and non-tariff measures. Due to the significant development gap among the 10 AMS, there are differences in the capacity to operate national trade repositories. To ensure the effective consolidation of information from national repositories into the ASEAN Trade Repository, it is necessary to develop and improve the capacity to manage and operate these national repositories. With proper data aggregation, the utility of the current ASEAN Trade Repository can be enhanced and it can lead to more active research in this area. -
The Relationship between COVID-19 Entry Restrictions and Immigration
In this paper, we investigate the relationship between COVID-19 entry restrictions and dependence on immigrants. In response to the global COVID-19 pandemic, countries worldwide implemented international travel restri..
Youngook Jang and Donghee Joe Date 2023.12.29
international immigration, public healthDownloadContentExecutive Summary1. Introduction2. Theoretical Framework3. Data and Methods4. Results5. Policy Implications6. ConclusionReferencesSummaryIn this paper, we investigate the relationship between COVID-19 entry restrictions and dependence on immigrants. In response to the global COVID-19 pandemic, countries worldwide implemented international travel restrictions to reduce the entry of infected individuals. These measures included entry and exit bans, mandatory quarantine of travelers, and vaccination requirements, significantly altering global mobility patterns. Despite their proven effectiveness, entry restrictions also impose substantial economic costs, particularly evident in the form of reduced immigration and subsequent labor shortages in sectors reliant on immigrant labor. We introduce a theoretical framework to shed light on the factors influencing the determination of entry restrictions, encompassing both health and economic considerations. Empirical analyses reveal that countries heavily dependent on foreign labor are inclined to adopt less stringent border controls, balancing the economic costs associated with reduced immigrant workforce. Moreover, we argue that the strength of entry restrictions is determined by a government’s capacity to manage infection waves through means other than entry bans. Finally, we offer policy implications based on our research, on how to control the spread of infectious diseases while minimizing the costs imposed by reducing immigration and the cost imposed on the immigrants themselves.< -
Individualism and Political Stability
This study analyzes the relationship between individualism as a cultural trait and political instability as a political characteristic. The intuition of the analysis is that cultural traits can determine political preferences of m..
Minhyeon Jeong and Wongi Kim Date 2023.12.29
competition policy, political economyDownloadContentExecutive Summary1. Introduction2. Empirical Findings on Individualism3. Theoretical Framework4. Empirical Analysis5. ConclusionReferencesSummary<This study analyzes the relationship between individualism as a cultural trait and political instability as a political characteristic. The intuition of the analysis is that cultural traits can determine political preferences of members of society. The study considers a specific political belief: “How much should the government protect individual property rights?” which extends to broader political beliefs such as profree market vs. pro-redistribution. According to numerous studies, individualistic cultures tend to support stronger protection of property rights than collectivist cultures. If the degree of protection of property rights is determined by the political choices of the members of society, it can be inferred that the political preferences that lead to strong protection of property rights reflect the individualistic cultures inherent in society members. That is, the political preferences of society members regarding the degree of property rights protection―or, in a broader sense, pro-free market versus pro-redistribution―are influenced by their cultural traits of individualism or collectivism.This study presents a politico-economic model that captures this intuition. The theoretical results are as follows. First, in societies where neither individualism nor collectivism dominates, political preferences for free-market or redistribution contrast more sharply than in societies where individualism or collectivism dominates. Second, this contrast in political preferences leads to political instability, such that societies where neither individualism nor collectivism dominates tend to be more politically unstable. This study provides empirical evidence supporting the theoretical results.This study identifies a relationship between cultural traits, political preferences and political instability, shedding light on the impact of culture on economic growth. In a nutshell, societies with highly heterogeneous cultural traits among their members are prone to polarization of political preferences, leading to political instability, which constrains economic growth in the long run.
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