Law amendments with reference to the EU General Data Protection Regulation (GDPR, henceforth) are flooding in Korea. It signals that GDPR is one way or another treated as a landmark for regulatory policy on data space. However, a point to see before such benchmarking is whether GDPR itself is compatible with the WTO Agreement. If not, Korea is likely to suffer from the same trade conflicts as the EU would face. Motivated by the concern, this study seeks to figure out key trade issues of Korea’s recent law amendments inspired by GDPR.
   The GDPR applies to all companies processing the personal data of data subjects residing in the EU, aiming to protect its citizens from privacy and data breaches as well as to facilitate free flow of data in the region. One of the major features of GDPR is the extended jurisdiction, so that it applies to the processing of personal data of the EU data subjects by a company not established in the EU. Non-EU businesses processing the data of EU citizens must appoint a representative in the EU to meet the obligations imposed by GDPR. Such requirement to appoint a local representative may be understood as a compliance measure in the GATS context.
   There is another kind of compliance measure, so-called ‘adequacy test.’ A country outside the EU should be recognised by the European Commission as having adequate protections in place in order to freely transfer personal data to somewhere outside the EU. It is the Commission that makes the final decision on adequacy status. Alternative route for a company without regional establishment to secure adequacy status for offshore processing personal data of EU citizens is to get an approval from supervisory authorities of EU Member States. In such instances, it is necessary for the company to adduce adequate safeguards for the protection of privacy and personal data.
   Is extraterritorial jurisdiction or adequacy test of GDPR trade-friendly then? Despite the lack of any available legal basis in trade agreements, the GATT dispute settlement panel once rejected extraterritorial jurisdiction because it would undermine the legal security of the multilateral trade framework. Adequacy test has potentially severe problems in terms of the GATS consistency. It is basically a discriminatory measure by reasons of origin, so that services and service suppliers are presumed to be of like. Unless such differential treatment is effectively justified by some other characteristics inextricably linked to such origin, it could constitute discrimination under MFN or national treatment obligations on a case-by-case basis. It deserves special attention for the EU to have a safeguard against such potential violations, none other than the GATS Article XIV (General Exceptions). In fact, this option is feasible for the EU because adequacy test is a compliance measure. Recourse to GATS Article XIV is available on the condition that challenged measure is a compliance measure, as far as it may be concerned with protection of privacy and personal data.
   Korea has been maintaining strong opt-in regulation on cross-border data transfer including personal data and space information. Contrary to regulation on space information equipped with solid national security ground, regulation on personal data transfer overseas is relatively vulnerable to trade friction. Views are spreading that Korea should change its policy stance to cope with the 4th industrial revolution, a common saying since 2016. Public sentiment still seems to put more weight on data sovereignty than usage in light of the recent law amendments. Patterns are unusual in law-making. Legislation is lingering in the Personal Information Protection Act that is the general law on the protection of personal data. In contrast, legislative efforts are very active in sectoral laws such as the ‘Telecommunications Business Act (TBA, henceforth)’ and ‘Internet Multimedia Broadcast Services Act (IMBSA, henceforth).’ Seemingly having little connection to the protection of personal data, they frequently adopt extraterritorial jurisdiction, local representative appointment requirement and adequacy test of GDPR.
   There are more to mention. Benchmarking GDPR, amendment bills of TBA and IMBSA claim to stand for relieving reverse discrimination in regulation. In a word, bill drafters presumably intend to solve regulatory issues induced by cross-border supply of value-added telecommunications services through capitalizing extraterritorial jurisdiction and local representative appointment requirement of GDPR. However, it is not unlike we try to open the lock with a wrong key. Figuratively speaking, it is a crossbite between means and end. Regulatory approach of this kind often leads to trade conflicts.
   Much more serious attention is due to two elements of the amendment bill of ‘Act on Promotion of Information and Communications Network Utilization and Information Protection, etc.’ One is the reciprocity provision and the other is the local server requirement. Aiming to authorize overseas transfer of personal data on a reciprocal basis, the former is scheduled to go into effect very soon. This clause is obviously a measure by origin discriminating between foreign online service suppliers. Without MFN exemptions registered in any trade agreements, Korea has no authority to implement such a measure. Although the latter is pending at the National Assembly, it is highly likely to run counter to Korea’s market access and national treatment obligations in the context of GATS and KORUS FTA as well. Therefore, repealing the amendments is greatly advisable to stop Korea from being embroiled in unnecessary trade disputes. 

Preface

Executive Summary

Contributors

Chapter 1. Introduction The European Union under Stress:Why It Matters for South Korea
KIM Heungchong (KIEP) and Françoise B. NICOLAS (Ifri)
1. A bumpy road to economic integration
2. Why this time is different
3. Why all this matters for Korea
4. The structure of the book

Chapter 2. Brexit: the Knowns Amongst the Unknowns ― For the UK, the EU and Third Countries, notably South Korea
Elvire FABRY (Jacques Delors Institute)
1. Introduction
2. State of play of Brexit negotiations
3. Potential scenarios for EU FTAs’ transition
4. A case study: Prospect for South Korea trade relations with the EU and the UK
5. Conclusion

Chapter 3. The Rise of Populism in  the EU and Changes in Political Geography
Matthew J. GOODWIN (Kent University)
1. Introduction
2. The evolution of national populism
3. Explaining the rise: Challenging conventional wisdoms
4. Conclusions

Chapter 4. Whither the Franco-German Motor?Overcoming Disputes and Reaching Compromises
Claire DEMESMAY (DGAP) and Barbara KUNZ (Ifri)
1. Introduction: From wonder to strategy
2. Education and culture
3. Eurozone reform
4. Defence
5. The way ahead
6. Conclusions: Lessons learned

Chapter 5. The EU and the Rise of US Protectionism
Iana DREYER (Borderlex)
1. Introduction
2. The deterioration of EU-US trade relations since the end of the Obama administration
3. EU’s response to the Trump administration’s trade policies
4. Conclusions and implications for Korea

Chapter 6. China and the EU: Main Economic Issues in Trade and Investment
Bernadette ANDREOSSO-O’CALLAGHAN (University of Limerick and Ruhr University Bochum)
1. Introduction
2. Theoretical framework for the appraisal of a bilateral economic relationship with implications on a third country
3. An analysis of the China-EU economic  relationship
4. Statistical analysis of the relationship and implications for South Korea
5. Concluding remarks

Chapter 7. Changing Landscape of Korea’s Economic Relations with Europe
Françoise B. NICOLAS (Ifri)
1. Introduction
2. EU-Korea economic relationship: A quantitative analysis
3. Qualitative analysis: what drives the  relationship
4. Conclusions and prospects

Chapter 8. The Future of the EU and its Implications to Korea
KIM Heungchong (KIEP) and LEE Hyun Jean (KIEP)
1. Introduction
2. Latent problems and revealed challenges
3. Criticisms on the EU regime
4. Projection on the future of the EU
5. Implications for Korea 

   The studies collected in this volume aim to illuminate what kind of challenges the EU and member countries have been facing now, how the challenges are developing, and what kind of implications we can draw for Korea.
   Chapter One is an introductory chapter, first highlighting the importance of crises in the EU’s development and then identifying the major drivers underlying the current difficulties and assessing how serious they are. Then it suggests what may be the major implications for some of the EU’s economic partners, with Korea as a case in point.
   Chapter Two talks about the current status of the Brexit negotiations and its impacts on countries such as Korea. The chapter covers the progress of the Brexit negotiations, chaotic status of post-negotiation politics in the UK, possible scenarios of future developments, and the impacts of Brexit on Korea as a case study. The author argues there is a growing probability for the alternative options of “no deal Brexit” or “no Brexit,” rather than the existing withdrawal agreement, and points out the numerous areas left by Brexit that will need to be addressed in the EU-Korea FTA and new UK-Korea economic relations.
   Chapter Three explores the rise of national populism in contemporary European politics, and the resulting changes in the political geography in Europe. It is very interesting to see how the author argues the current phenomena of rising populism are deep-rooted, much more than a mere response to the 2008 financial crisis, and closely related to the values divide in contemporary Europe.
   The next chapter concerns itself with Franco-German relations, which have been regarded as the motor of European integration. The authors appreciate the unprecedented process of reconciliation between the two countries in the course of European integration, but highlight the fundamental difference between the two countries in fiscal, monetary and defense policies arising from different political cultures. Talking about how the changing geography has placed the two countries into a leading role over the process, they suggest the two countries need to focus on exploring new areas of cooperation ‒ agenda for future challenges in Europe such as digitalization or climate change. This chapter provides ample implications to Korea on how to make regional cooperation work under fierce rivalry and regional dynamics.
   In Chapter Five, the author analyses the crisis in transatlantic relations coming into the Trump administration, and its implications for Korea. According to this chapter, the EU has responded to the protectionist approaches by the US by promoting cooperation with the US against China, staying with the US in the WTO and multilateralism, and the proposal of new trade agreements with the US and other countries. As the protectionist measures proposed by the US grow out of a prior history extending before the Trump administration, the tension is likely to last longer. The author concludes with some implications for Korea’s trade policy.
   Chapter Six covers China and the EU from the perspective of trade and investment. Although the two giants have achieved excellent performances in economic relations over the past several decades, tensions from China’s aggressive investment strategy to Europe have been arising. The author argues that Brexit would lead to the UK’s approach to the US rather than China, and that Korea would benefit from the geo-economic upheaval resulting from Brexit.
   In Chapter Seven, the author explores the recent history of economic relations between the EU and Korea. The author examines the impact of the EU-ROK FTA on trade relations and elaborates on the reason why the trade structure suddenly changed after the FTA. The author argues that is not only the result of tariff and non-tariff barriers elimination, but also of sluggish demand from the EU following the economic crisis in Europe, expanding value chains with third countries by Korean giant companies, and so on. The author also argues that the EU-Japan EPA, recently signed and about to enter into force in early 2019, will have a substantial impact on the EU-Korea trade relations, as Japan and Korea are competing in many industries.
   Chapter Eight examines the prospects of the EU regime and its implications to Korea. The authors talk about recent challenges in the EU such as its ageing society and enlargement process, together with other issues discussed in previous sections, which may have great impacts on discussions of the future of the EU. Then, the authors introduce recent developments toward the future of the EU led by the EU institutions and other players in Europe. Finally, the authors present the implications the EU holds for Korea, and the third countries located in East Asia, making for rare observations to Europeans. 

 

   This study identifies potential threats to exporters to the U.S. caused by the recent changes in U.S. trade remedies. A close examination is conducted of U.S. trade remedy measures against Korean businesses. The second chapter reviews the political and economic background of the recent legislations for U.S. trade remedies. The third and fourth chapters analyze the institutional and implementational changes in antidumping and countervailing duties, and safeguard measures carried out under the Trump administration, respectively.
   Our results find that the series of amendments to U.S. trade remedy laws aim to grant the two investigation authorities, i.e. the U.S. International Trade Commission and Department of Commerce, greater discretion in making their decisions and in calculating the price advantage provided to foreign exporters. In antidumping and countervailing duty cases such amendments lead to more facile application of a higher dumping margin or subsidy rate to foreign producers through an increase in normal value, use of Particular Market Situation (PMS) or Adverse Facts Available (AFA) or both, and a failure to cooperate on the part of a respondent. In doing so they serve the purpose of strengthening the position of U.S. domestic industries with protectionist tendencies.
   The study shows that the U.S. laws on safeguards, general and security, have not changed much since the enactments, but there has been a significant change in their implementations. The Trump administration has consecutively triggered general safeguard measures against Korean residential washing machines and solar products for the first time in 16 years, and initiated investigations on a threat to national security posed by imported steel, aluminum, and automobile products. It has employed general safeguards to prevent foreign exporters from circumventing antidumping duties, which may not be in line with their original purpose, and has been applying security safeguards rarely used in the past to a breadth of imports, aggressively interpreting the definition of national security. 

Foreword

Executive Summary

Contributor

1. Introduction – framework
1.1 General information - needs
1.2 Scope and objectives
1.3 Literature, theories
1.4 Methodology, process
1.5 Expectations
1.6 Research structure

2. Concepts and definitions – describing the relevant knowledge methodology, the foundation  and
     the structures of the economic model
2.1 Knowledge Management (KM)
2.1.1. Concept, definition
2.1.2.Knowledge characteristics in the Knowledge Management approach
2.1.3. Intellectual Capital
2.1.4. Knowledge Organization and Knowledge Worker
2.1.5. Knowledge Productivity
2.1.6. Knowledge Management process
2.1.7. Knowledge Management tools 
2.1.8. Practical examples of Knowledge Management implementation
2.1.9. Knowledge Economy Pyramid framework
2.1.10.Assessment tools for the readiness to adopt Knowledge Management
2.1.11. The need for Knowledge Economy
2.2 Knowledge Economy (KE)
2.2.1. Concept, definition, and pillars
2.2.2. Functionality 
2.3 Knowledge Triangle (KT)
2.3.1. The stakeholders and their roles
2.3.2. Evolution of the concept – establishing the European Institute of Innovation and Technology
2.3.3. Knowledge Innovation Communities
2.3.4. Measuring performance in innovation
2.3.5. Necessity to improve the Knowledge Triangle
2.4 Triple Helix
2.4.1.Structural harmonization in the Knowledge Economy Pyramid
2.4.2. The outline, concept, and stakeholders
2.4.3. Outlooks
2.4.4. Cycle and functionality
2.5 Smart Specialization
2.5.1. Build up the concept
2.5.2. Stakeholders and partnerships
2.5.3. Smart Specialization Strategy (S3)
2.5.4. The process of implementation
2.5.5. The roles and functionality
2.5.6. Bottom-up approach
2.5.7. Research and Innovation Strategies for Smart Specialization

3. Correlations and synergy – analyzing the knowledge ecosystems
3.1 University – Science
3.1.1. Knowledge generator function
3.1.2. The virtuous knowledge cycle
3.1.3. “Third Mission” of the university, lifelong learning concept and the needed reforms
3.1.4. Education performance around the globe
3.2 Business – Innovation
3.2.1. The two-way approach: bottom-up and top-down
3.2.2. Central axis of the pyramid
3.2.3. Innovation analysis
3.2.4. Touching creativity
3.2.5. Economic value of innovation
3.3 Research – Technology
3.3.1. The role of Information and Communication Technology (ICT)
3.3.2. Best practice: Samsung Advanced Institute of Technology (SAIT)
3.3.3. Build supportive environment
3.4 Government – Administration
3.4.1. Critical correlation for capacity building
3.4.2. Validating the model on different economic environments
3.4.3.Key drivers for establishing the Productivity and Competitiveness Center
3.4.4. Practical correlation: Korean Government – Korea Productivity Center
3.4.5. Adopting the best regulation to foster innovation
3.4.6. Key roles in the public administration innovation initiatives
3.5 Clusters – Community
3.5.1. Enhancing the local potential
3.5.2. Clustering process
3.5.3. The case of Korea: chaebol
3.5.4. Regions of Knowledge
3.5.5. The role of clusters for competitiveness

4. Measurement and indicators – assessment methodologies and indices
4.1 Outputs
4.1.1. Knowledge as resource
4.1.2. Understanding the knowledge before measuring
4.1.3. Productivity and statistics
4.1.4. The art of touching the untouchable
4.1.5. Knowledge Assessment Methodology
4.1.6. Knowledge indices
4.1.7. Global Competitiveness Index (GCI)
4.1.8. Global Manufacturing Competitiveness
4.2 Outcomes
4.2.1. Standard of living and quality of life
4.2.2. Human Development Index
4.2.3. Green Growth
4.3 Action plan
4.3.1. Specific terminology and the abstracting model
4.3.2. The 7 stages of implementation
4.3.3. Build up around the 4 pillars
4.3.4. Policies alignment and reforms
4.4 Perspectives of cooperation
4.4.1. The Knowledge Sharing Program
4.4.2. Planned organizational framework for Romania
4.4.3. Upgrading the cooperation
4.4.4. The role of the Productivity and Competitiveness Center at national level
4.4.5. The proposed action plan for Romania
4.4.6. The benefits of the cooperation
4.5 Lesson learned
4.5.1. Korean development after The Second World War – the 4 milestone of the Knowledge Economy
4.5.2. The way ahead towards Knowledge Economy

5. Impact - validation and sustainability
5.1 Productivity
5.1.1. Productivity as development strategy
5.1.2. Concept’s analysis
5.1.3. Case study: Korean productivity
5.1.4. Korea Productivity Center
5.1.5. Productivity in the European Union
5.2 Macro-economy
5.2.1. Changing of the development paradigm
5.2.2. Economic theories
5.2.3. The status of Knowledge Economy
5.3 Public policy
5.3.1. The context and the role of policymakers
5.3.2. The policy/decision-making process
5.3.3. The stages of policymaking process
5.3.4. Strategical approach
5.3.5. The EU principles for transition to the Knowledge Economy
5.3.6. Where is the knowledge frontier?
5.3.7. Recommendations for building institutional capacity
5.4 Society
5.4.1. The value for money
5.4.2. Comparing development cultures
5.4.3. The supremacy of the model
5.5 International relations
5.5.1. Collaborative approach
5.5.2: Going international

6. Conclusions
6.1 One-stop shop body of knowledge
6.2 The value proposition
6.3 Threefold conclusions for the analyzed economies
6.4 Sum-up the findings
6.5 Research perspective
6.6 Final remarks

Appendix

References 

   The global economy’s landscape needs a new economic model where knowledge is used as a valuable resource to stimulate innovation, creativity, and entrepreneurship in order to increase productivity and competitiveness for sustainable growth as a premise for social welfare. The policymakers have to design the new public policy for productivity and competitiveness considering the Knowledge Economy frontier and to establish the institutional capacity to manage the knowledge perspective of development. The Knowledge Economy Pyramid model is a catalyst of knowledge ecosystems from education, research, technology, business, innovation, government and local communities, capable to create a collaborative environment with synergy effect: transforming knowledge value in increasing productivity and competitiveness.
   The Knowledge Economy Pyramid is a robust framework based on the four pillars of Knowledge Economy with three effective and powerful structures build upon: Knowledge Triangle, Triple Helix, and Smart Specialization. The main axis which unifies these structures is education-business and all the other stakeholders from research, science, technology, government, administration, clusters, and community are equal contributors to process the knowledge along the central shaft.
   Considering the Knowledge Economy Pyramid model, this research work is defining the coordinates of the public policy for productivity and competitiveness which will be implemented by the institutional capacity – Productivity and Competitiveness Center. This institution is a concrete and accurate representation of the Knowledge Economy Pyramid model with the scope to implement the principles of Knowledge Economy to increase productivity and competitiveness as outputs of the process. Moreover, the capacity building will provide the premises to conclude the new public policy into outcomes: standard of living, well-being, quality of life, and green growth.
   Knowledge Economy Pyramid provides a toolkit for policy/decision- makers to take action in order to improve the activity at any stage of development or maturity for an economy or institution related with productivity and competitiveness and it is able to measure the gap between actual development level and the knowledge edge.
   From an economic perspective, to analyze the concepts of productivity and competitiveness in Knowledge Economy, this study is a very complex work where the tangible is mixed with the intangible, human with technology, economic growth with people prosperity. This study is a “one-stop shop” for all the policy/decision-makers, leaders, representatives, officials, professors, researchers, specialists and practitioners, all engaged in the work to transform the traditional economic model into a new one, according to the Knowledge Economy Pyramid framework.

 

Keywords:Knowledge Economy; Knowledge Triangle; Triple Helix; Smart Specialization; innovation; productivity; competitiveness; sustainable growth 

 

   Private sector development is imperative to alleviate poverty and drive economic development. In developing countries, small and medium sized enterprises make up the majority of the private sector and provide most of the employment. As such, growth in the private sector generates income for many parties. The UN Sustainable Development Goals(SDGs) underscore the role of the private sector even further. Highlighting inclusiveness and sustainability, the SDGs mention the need to foster SMEs’ capacity and to enhance their participation in the global value chains(GVCs). A number of leading donors have developed Aid for Trade strategies, identifying trade capacity building or access to GVCs as key areas for support. According to the OECD DAC Statistics, Korea has provided substantial trade-related support to developing countries. However, Korea has primarily focused on hard infrastructure, such as roads and railways. It is necessary for Korea to diversify the scope of its trade-related support to foster growth in the private sector and its participation in GVCs.
   The objective of this study is to present a strategy and implementation plan for Korea’s Aid for Trade. In particular, we focused on strengthening developing countries’ access to GVCs. We reviewed literature to provide an overview of discussions in the international community regarding GVC participation and economic development. In the case study of Vietnamese participation in GVC, we conducted a field study as well as quantitative data analysis. Finally, we undertook an extensive literature review in order to analyze the AfT strategies and GVC support programs by major donors and multilateral organizations. Incorporating the findings from each section, we suggested an overarching policy direction on AfT for the Korean government to contribute to the GVC participation of developing countries’ SMEs. The following is a summary of the chapters of this report.
   This study begins by presenting discussions on the role that GVC participation plays from the perspective of developing countries when it comes to advancing sustainable development. From a developing country perspective, we review the discussions on how participation in global trade will foster sustainable development, the benefits and barriers to GVC participation, and policy measures to promote GVC participation. The SDGs emphasize SME productivity enhancement, export competitiveness, and high-quality job creation in connection to participation in GVCs. Nevertheless, developing countries face a number of complex constraints to participate in GVCs. Such challenges vary depending on the stages of GVC participation, that is, entry – integration – upgrading. Therefore, different policy measures are required depending on the stages of GVC participation.
   In Chapter 3, we identify the benefits and constraints of GVC participation for SMEs in developing countries. As a concrete example, we selected Vietnam, a major export partner and also an ODA recipient of Korea. Based on data analyses, we draw implications for developing a support strategy. First, we analyze the supply and purchase relationship of Vietnamese enterprises in the electronics and food processing industries. Conducting an empirical analysis of the productivity premium associated with GVC participation, we seek the correlation between GVC participation and technology competence as well as the level of technological competence required to upgrade within the GVCs.
   An examination of the supply and purchase relations of Vietnamese electronics and food processing enterprises revealed different characteristics between the two industrial sectors. In the electronics industry, enterprises – often large in size – supplied intermediate goods to the global market. In the food processing industry, local SMEs procured intermediate goods to domestic food processing enterprises, and these larger enterprises engaged in the GVCs by providing final goods to the global market. In other words, enterprises in the food processing industry engage with the GVCs through the export of finished products, whereas enterprises in the electronics industry often subcontract with foreign companies. Companies in the electronics industry are highly focused on a small number of overseas buyers. Therefore, they are exposed to a large chance of progressing into a structure that is dependent on overseas firms. On the other hand, the transfer of technology was more likely in the electronics sector compared to food processing.
   The correlation between participation in GVCs and corporate productivity premium revealed different impacts according to the level of GVC participation. Despite large employment, firms with high GVC participation rate displayed low productivity, signaling that the learning effect of GVC participation is low. Analysis of the correlation between participation of GVCs and technology competence from 2013 to 2017 was also low, meaning that there was little technology development.
   Summing up the analysis from Chapter 3, we conclude that in Vietnam – and other similar countries – Korea should focus on assisting the enterprises to advance within the GVCs by enhancing their technology capacity. Needless to mention, adequate institutions and policy are required. In particular, cooperation between enterprises could be enhanced rather than measures to facilitate trade and reduce trade costs. During the field study, we observed a large demand for increasing partnership between enterprises to foster technological capacity. In response, an innovative partnership program between and among the public and private sector can be beneficial.
   In Chapter 4, we review the strategies and programs regarding AfT and GVC participation of selected donors and multilateral organizations. Upon conducting a thorough investigation, we identified a number of characteristics shown by different donors and organization. The German Federal Ministry of Economic Cooperation and Development (BMZ) has been promoting Aid for Trade under an organized strategy since the early 2000s. The United States Agency for International Development (USAID) emphasizes strengthening trade capacity in order to expand participation in GVC. In addition, the Swiss State Secretariat for Economic Affairs (SECO) promotes SME trade capacity building under an SME development strategy. As a designated UN agency for industrial development, the UNIDO supports SME development and trade capacity building. In sum, all of the organizations reviewed maintained some level of strategy regarding AfT or GVC participation. They provided systematic support based on their respective strategies. While considering the various challenges and barriers to GVCs, they also took account of their own strength and advantages in designing the intervention. Some noteworthy characteristics of these organizations can be summarized as follows.
   To begin with, BMZ supports developing country enterprises to participate in GVCs by improving quality-related infrastructure and enhancing production capacity. Furthermore, BMZ actively encourages participation from the private sector – both German and developing countries. On the other hand, USAID supports a broader inclusion of developing country stakeholders to GVCs by increasing agricultural productivity, developing service industries, conforming to international standards, increasing private sector participation, and improving trade-related institutions. The Swiss SECO diversifies its partnership strategy and performance framework according to the country’s development stage. In the case of Vietnam, SECO works to promote entrepreneurship, sustainable trade and competitiveness, and resource efficiency for Vietnamese SMEs. UNIDO assists trade-related institutional building and trade cluster development, maximizing the use of its vast network of cooperating partners.
   Korea has accomplished remarkable economic growth over the past decades, largely due to active trade. Therefore, Korea possesses a wealth of experience in trade and development. However, these valuable experiences have not yet been applied to intenational development cooperation. Furthermore, official development assistance(ODA) is delivered in an uncoordinated manner without clear guidance or strategy on AfT. In addition to stressing the urgent need to develop guidance/strategy on AfT, the study suggests the following points for further consideration.
   First, it is necessary to expand AfT activities beyond economic infrastructure construction projects to those that can improve production capacity. Our analyses and interviews with local enterprises in Vietnam confirmed that production capacity building is most needed for developing countries to create high value-added products and climp up to the next stage of the GVCs. Since there is no AfT strategy at present, Korea can highlight the relevance of production capacity building in SDGs 2, 8, and 9, and promote the private sector in developing countries to participate in the GVCs.
   Second, GVC-related interventions require an industry-specific approach. In our analysis, different industry sectors showed significant differences in the challenges and capacity to access the GVCs. Therefore, support programs must be customized by industry to address the different challenges each industry is facing. For example, in the case of electronics, transfer of technology can occur during interactions with foreign companies through the close link between local firms and overseas firms. However, the food processing industry has little need for interaction with foreign companies during production, and therefore technology diffusion is unlikely. ODA to promote further cooperation between Korean and Vietnamese enterprises can be beneficial for the electronics sector, whereas knowledge sharing on trade regulation and support on regulation-related capacity building is more valuable for the food processing industry. International Development cooperation programs for different industries must vary in line with the characteristics of the industries.
   Third, there is a need to further enhance private-to-private partnership between enterprises in developing countries and Korea. The German BMZ promotes a program to enhance the technical capacity of developing countries so they can access to and advance within the GVCs. A noteworthy element is that the program targets its support to EU (and German) companies which will expand their businesses to developing countries while integrating the value of mutual benefit. We also experienced a strong desire from the private sector in Vietnam to collaborate more closely with the Korean private sector during the field research. Especially for a middle-income country like Vietnam, and for a technology-intensive sector like electronics, the public sector should take on a role that is innovative in encouraging active private partnership between two countries.
   Finally, it is important to provide consistent support to elevate the trade-related capacities of individuals and institutions at parmer countries. Considerations should also be made to harmonize development cooperation and trade policy throughout these support measures. While Korea is already providing support to trade facilitation programs, there is room to improve. Our field study has revealed a number of challenges in non-tariff barriers in trade, such as sanitary and phytosanitary(SPS) measures. For instance, in order to foster Vietnamese enterprises’ participation in the GVCs, technical assistance is needed to improve the capacities of Vietnamese food processing enterprises to meet SPS. 

Introduction

Chapter 1. International Trade in Services
1. Introduction to International Trade in Services
2. Historical Trends in International Trade in Services
3. Intelligent Automation, Services Trade, and Outsourcing

Chapter 2. AI-Powered Intelligent Automation
1. Impact of Intelligent Automation on Jobs
2. Advances in Intelligent Automation and Service Occupations

Chapter 3. Overview of Data on International Trade in Services and Service Automation
1. Data on International Trade in Services
2. Data on Industry Automatability
3. Automation and Service Exports and Imports
4. Data Analysis Models

Chapter 4. International Trade in Services and Automation
1. Annual Growth Rates in International Trade in Services
2. Growth Rates in Highly Automatable Service Industries
3. Growth in Services Trade in Developed vs. Developing Economies
4. Growth in Services Trade by Different Levels of ICT Development
5. Growth in Services Trade in High GDP/Income vs. Low GDP/Income Economies
6. Growth in Services Trade by APEC Member Economies
7. Analyses of Select APEC Member Economies
8. Summary of Key Findings

Chapter 5. Policy Implications and Recommendations for APEC
1. Principles for Policies and Regulations for Intelligent Automation
2. Recommendations for Policy Directions
3. Policy Recommendations for APEC Member Economies
4. Roles of Korea in Promoting Shared Prosperity in APEC Economies

Conclusions

Appendix

Executive Summary 

   The advances in intelligent automation enabled by artificial intelligence (AI) could make a wide range of service jobs obsolete at an accelerated speed. These jobs that are threatened by automation include not only routine low-skilled service jobs but also high-skilled, knowledge-intensive service jobs. The service producers in developed economies have been resorting to high-skilled workers in developing economies via service offshoring to take advantage of lower wages. However, intelligent automation could offer the service firms with an even cheaper alternative than service offshoring, threatening employment in the service industries in developing economies.
   The objective of this study is to investigate the impact of intelligent automation on international trade in services. We posit that AI-powered intelligent automation reduces the demand for service offshoring, which, in turn, leads to a decline in international trade in services. To test this hypothesis, we use multiple data sets including the U.N. Comtrade trade data over the period from 2000 to 2016, the O*NET data, the World Bank Open Data, and ITU’s ICT Development Index (IDI). We run a series of regression analysis to take a deep dive into the temporal patterns of international trade in services.
   We find that the annual growth of international trade in services over the period from 2000 to 2016was 1.67%. However, we observe that the annual growth rate significantly declined from 2014 after healthy growth between 2008 and 2014. However, whereas highly automatable service industries such as financial services, information services, and professional services experienced a negative annual growth rate from 2014, other less automatable services industries did not experience a significant decrease in their annual growth over the same period. Therefore, we could infer that intelligent automation replaced service offshoring of highly automatable services and as a result, international trade in those services declined.
   Our further analysis shows that the exports in highly automatable services from developing economies to developed economies witnessed a significant decline since 2014. However, we did not find the same pattern in less automatable service industries. We also see that, over the period from 2000 to 2016, the annual growth in the service exports from countries with a low level of ICT development to countries with a high level of ICT development was significantly lower than that from countries with a high level of ICT development to other countries. This finding is consistent with prior findings that ICT facilitates international trade. However, since 2014, we are witnessing a decline in both the exports and the imports in services in countries with a high level of ICT development. This decline was more significant in highly automatable service industries. We could infer that countries with a high level of ICD development have more advanced intelligent automation technologies, which reduce the demand for service offshoring.
   When we limit the scope of our data analysis to 21 APEC member economies only, we still find the same results. While highly automatable service industries experienced a decline in international trade since 2014, less automatable service industries did not experience such a fall. Another interesting finding is that the exports from the developing economies within APEC to the developed countries within APEC decreased more significantly than the exports from the developed to the developing, from the developed to the developed, or from the developing to the developing economies. Finally, it is found that China, India, Korea, and Russia experienced growth in service exports until 2012 but since then witnessed a decline in service exports starting from 2012.
   We discuss the implications of these findings and offer policy recommendations. We present five guiding principles for regulations and policies for intelligent automation technologies, ten policy directions, and six specific policy recommendations for APEC member economies. Finally, we discuss how South Korea can serve as a model and contribute to promoting shared prosperity in APEC member economies. 

 

   Mongolia is one of the twenty four key partners with South Korea in accordance with the Second Medium-Term Development Plan of the ODA from 2016 to 2020. South Korea has been the second largest bilateral partner with Mongolia among countries participating in the international development cooperation projects for Mongolia. Although the health sector has been emphasized in the Second Mongolia Country Partnership Strategy (CPS) announced in 2016, South Korea's cooperation in health sector of the ODA projects has been limited to the hardware-based business of establishing healthcare infrastructures or to strengthening the capacity of healthcare personnel.
   Since the international cooperation strategies for Mongolia includes the health sector, it is necessary for the domestic development partners to understand the health level of Mongolia and the health care system in order to find a way to cooperate with Mongolia for development of health sector. The partners also need to be aware of the donor countries that are involved in the projects and the contents of their collaboration with Mongolia. In addition, it is essential to examine how Korea has proceeded those development projects in Mongolia so far and difficulties it has faced.
   Therefore, this study aimed to investigate how major donor countries and health related multilateral organizations such as WHO have supported the development of health sector in Mongol, based on the understanding of the current status of Mongolian health and health policy and systems. The purpose of this study is to describe the current status and the challenges regarding Korea 's cooperation in developing health sector in Mongolia and find implications for our future cooperation.
   This study found that Mongolia has problems related to a low population density compared to its vast land, a severe regional imbalance in health infrastructures, and a high burden on non-infectious diseases. Mongolia has been striving to strengthen its national healthcare capacity in line with the Millennium Development Goals and the Sustainable Development Goals. As a result, Mongolia has achieved success in the prevention and management of infectious diseases, which led the major donor countries to redirect their support from basic health area to general health area, focusing on strengthening health care systems and improving the quality of health care services.
   Mongolia is a middle and low income country. Mongolia has constantly enhanced the accessibility of health care service in order to improve the public health and the health care system through introduction and modification of the health insurance to benefit the entire population, an establishment health care system through 1st, 2nd and 3rd national plans, and employment of telemedicine. However, Mongolia faces a financial burden which makes it difficult to invest in continual development of the healthcare sector due to the recent declination of economic growth rate and economic recession accompanied by inflation and a rise of exchange rates.
   Mongolia has not only put its own efforts into coping with health issues, but also promoted development cooperation projects with various multilateral and bilateral parties for the improvement in health sector. This study examined the cooperation projects of major donors such as Japan, Luxemburg, WHO, and ADB. This study found that the major donors' projects for the development of the Mongolian health sector were being carried out in a variety of ways. While the cooperation projects are different according to the donor countries, they commonly aim at achieving universal health care coverage called 'leaving no one behind' which Mongolia has been pursuing. In addition, the major donors were utilizing a cooperative network among the various development partners to implement the health sector development cooperation projects. The major donors have established mid- and long-term plans with concrete contents and carried out their projects accordingly.
   Similarly to the major donor countries, Korea's Mongolian health sector development cooperation projects also presents its mid- to long-term priority areas and directions through national cooperation strategies. But there is a difference in the level of specificity of the contents between Korea and other donors. In addition, Korea 's Mongolian health sector development cooperation project is centered on the health system area which is also supported by major donors such as Japan, ADB and WHO. It implies that South Korea might need to discover new support areas where are not overlapped with the support areas of other major donors, we can apply our strengths to, and Mongolia expresses as its demand as well.
   Based on the recognition of these situations and problems, this study suggests to provide customized support to meet the health needs of Mongolia and support for strengthening the response capacity to cope with public health problems. We also pointed out that customized support and support for strengthening Mongolia's response capacity should be based on establishing a Mongolian health sector development cooperation plan that reinforces network with domestic and international development cooperation partners and entails specific steps.
   Upon consideration of the needs of Mongolia and the possible application of our strengths, this study recommends projects related to strengthening the health care coverage and the capacity to prevent and manage non-communicable diseases, such as strengthening the Mongolian healthcare workforce capacity through advanced training and providing technical support to improve health information system, as parts of the customized support and support to strengthen the response capacity. 

 

   The purpose of this study is to investigate the effects of the Japanese government support system on business restructuring. This study also aims to draw policy implications for the Korean government to keep in mind as it administers the Special Act on the Corporate Revitalization, notwithstanding the different business environments in Japan and Korea, and the differences in policy direction and legal institutional basis set by the two governments. The results of the study can be summarized as follows.

 

   First, the types of business reorganization measures regulated by the Japanese Industrial Competitiveness Enhancing Act are summarized by year, showing the highest utilization rate over the period of 2000 to 2005. Since 1999, Japanese companies have begun to increase the number of domestic M&A every year, indicating that the government has satisfied the 'demand' for M&A by domestic businesses.

 

   Second, in accordance with the Industrial Competitiveness Enhancing Act, Japanese corporations have actively utilized the special measures of the Commercial Act, tax support measures, low-interest financing by government financial institutions.

 

   Third, the number of business reorganizations using the Japanese Industrial Competitiveness Enhancing Act dropped to 15 or less annually from 2013, but this decline in utilization does not mean that the law itself is useless. Rather, the results suggest that the Japanese government responded timely to the demand for business restructuring by various measures.

 

   Fourth, in terms of legal and institutional aspects, the Japanese Industrial Competitiveness Enhancing Act can be highly evaluated in that the exceptional measures prescribed by the Act have been 'generalized' into revisions of the Commercial Act and the Corporate Law. 

 

   The policy implications for the Korean government, as it administers the Special Act on the Corporate Revitalization, are as follows. 

 

   First, the scope of the law is too narrow, as can be seen in its limited application to 'domestic companies that restructure their business to overcome oversupply.' In order to contribute to business restructuring efforts in Korea, the explicit condition of 'oversupply' should be eliminated and the scope of the law expanded to support all new business activities for the fourth industrial revolution.

 

   Second, it is necessary to keep in mind that the special measures within the Commercial Act and the Fair Trade Act stipulated under Korea’s Special Act on the Corporate Revitalization need to be incorporated into general provisions within the Commercial Law and Fair Trade Act if they show favorable results in terms of actual utilization by corporations.

 

   Third, Korea will have no choice but to operate its business restructuring support system in a way different from that of Japan due to various issues, including the succession of management rights by Chaebol owners. These special considerations reflect the unique characteristics of the governance structure of the Korean Chaebol and must be distinguished from support measures for business reorganization. 

 

   The main objectives of this research are twofold. The first objective is to analyze the trade structure between Korea, China and Japan between the years of 2001 and 2017 and propose measures to expand trade with China. In particular, this research argues that the existing trade structure with China has run into limitations due to a decrease in China’s import of intermediary goods and a consequent increase in competition within the industry, and thus it will be important to utilize China’s various policies such as the New Industries Policy and High-Quality Consumption Policy, etc., in order to expand trade. It will also be necessary to devise new China FDI policies that take into account the recent changes in China, especially in the fields of the Fourth Industrial Revolution, domestic consumption goods industries, and high value-added service industries. This is covered in Chapter 2 of the study. The second objective of the study is to derive policy implications for Korea and Korea-China-Japan (KCJ) cooperation in the following three areas: the 4th Industrial Revolution, e-commerce, and cultural contents. This is covered in Chapter 3 to 5 of the study.
   Chapter 2, “Changes in Korea, China, and Japan’s Trade and Investment Structure,” reviews the changes in the trade structure in the three countries, and examines new measures of cooperation to respond to changes in trade (including investment) structures between Korea, China and Japan. The results indicate that advances in China’s production and export have increased the similarity between the trade items in Korea and China, and this in turn has changed the trade structure between the two countries, from a focus on division of labor toward more intra-industry competition. Meanwhile, in the case of Japan, no mutual similarity is visible between the two countries in their trade items.
   In Chapter 3, “Korea, China, and Japan’s Cooperation in the Fourth Industrial Revolution,” this research first analyzes the three countries’ government policy in the field of the Fourth Industrial Revolution, then reviews the cases of cooperation between Korea, China and Japan, going on to propose promising directions or agendas for cooperation. According to the analysis, cases of Korea-China-Japan cooperation in the fields of the Fourth Industrial Revolution are rare, and Korea does not seem to have a clear direction for industrial cooperation with either Japan or China. In this context, this study presents tasks and directions for Korea-China cooperation, as well as for Korea-Japan cooperation, rather than drawing a common direction or agenda for trilateral forms of cooperation.
   In Chapter 4, “Korea, China, and Japan’s Cooperation in E-Commerce,” this study looks into cross-border e-commerce trade, which is growing rapidly in the recent years. This chapter aims to identify trends and characteristics of e-commerce policies in Korea, China, and Japan and draw implications for cooperation in the e-commerce sector. In the search for areas of cooperation in KCJ’s cross-border e-commerce trade, this chapter focuses on three areas: cross-border measures (including customs clearance and logistics), movement of data across borders, and consumer protection. According to the analysis, cooperation between KCJ is most feasible in the areas of customs clearance and logistics. In particular, joint partnership projects between cities, an area which has received much attention recently, could be effective when it comes to enhancing intra-regional cooperation in cross-border e-commerce. In the area of data transfer across borders, it would be difficult to reach a consensus among KCJ due to clear differences in the respective positions of the three countries. Finally, in the field of consumer protection, this study notes the discussions currently progressing through channels such as the Korea-China-Japan Consumer Policy Council, and stresses that developing and strengthening these communication efforts would yield more meaningful outcomes in the area.
   Chapter 5, “Expanding Korea’s Exports of Cultural Contents in China and KCJ Cooperation,” examines the three countries’ policies of promoting cultural contents industries and regulatory policies—implemented in order to protect indigenous industries—and suggests policy implications for Korea. Korea`s cultural content export is heavily dependent on China and Japan, and its export sector is also heavily concentrated in the game industry; thus, it is necessary to diversify its export destinations and foster new contents sectors. This chapter examines cultural contents policies in the three countries, as well as regulations and barriers to foreign entities in the cultural contents industry, comparing and evaluating the three countries’ policies to suggest changes to Korea’s cultural contents exports strategy. 

 

   In order to improve the quality of decision-making by Korean policy makers and members of the business community with respect to Korea's economic engagement with the Association of Southeast Asian Nations (ASEAN), better data and more systematic analysis are needed. One way to achieve this is to use a type of industry analysis where firm-level data are aggregated to an industry level over time and industry characteristics such as size, profitability and growth potential are identified and analyzed in a systematic way. The output can be used as a useful basis for strategic decisions as to how Korea should effectively engage the ASEAN economies.
   Common approaches to ASEAN industries tend to use macro data such as industrial production in the national accounts framework or trade and foreign direct investment statistics, while it has been rare to use micro data gathered at the firm level. Even when firm-level data are used, it is usually in the form of surveys with a narrow focus on business decisions and sentiments. Survey data on ASEAN industries tend to be limited in representation, data continuity, and detailed information on corporate finance.
   In this study, we adopt a dynamic industry analysis framework from Chang (2014), which aggregates firm-level data to an industry level to classify ASEAN industries according to their characteristics. Specifically, we analyze market capitalization, assets, sales, and profitability of listed firms in six major ASEAN countries. This is a pilot study and should be regarded as a first installment of a long series of investigations. We have to adopt a sequential approach due to the challenges of obtaining high-quality firm-level data in all ASEAN countries in a comparable format. Expanding beyond listed firms poses a considerable challenge and we add a discussion of how we plan to expand our future research in the conclusion of this report.
   Chapter 1 lays out the subject and contribution of this study. In Chapter 2, we briefly discuss the global standings of ASEAN firms and then the corporate ecosystems of each country. The indicators from Fortune Global 500 and the global competitiveness index of the World Economic Forum show that while the global competitiveness of ASEAN firms varies significantly across countries, global ASEAN firms are concentrated in the energy and commodity sectors and often state-owned. National statistics also indicate that small and medium-sized enterprises (SME) account for the majority of the total number of firms and employment while large corporations contribute disproportionally to the output and export in most countries. Although such findings are largely consistent with common perceptions, the results should be read with caution since most existing SME statistics, in addition to common data quality issues, are likely to suffer from definitional confusion, including the misclassification of self-employed persons or certain family businesses as enterprises.
   In Chapters 3 and 4, we perform a preliminary industry analysis using corporate data from ASEAN listed firms. In Chapter 3, we examine the aggregate picture of listed companies in the ASEAN region as whole. First, after presenting the descriptive statistics of the stock market in each country, we compare market capitalization, average asset sizes and revenues, average profitability by industry in ASEAN. The results indicate no strong correlation between the average revenues and maximum revenues of an industry, and no correlation between the size of a national economy or income levels and the average revenues and maximum revenues of an industry. The rank orders of industries by average profits and maximum profits are not correlated. Neither the size of a national economy or income levels are related to the average profits and maximum profits of an industry. Vietnam has the most profitable industries in all 17 industries, followed by Thailand, Indonesia, and Singapore. Vietnam's high profitability may be due to the country's low level of development. Singapore, Malaysia and Thailand have the most industries with lowest profitability by industry.
   In Chapter 4, we compare the number of companies, assets, revenues, and profitability by industry by country. In all countries, manufacturing is the largest industry in terms of the number of companies, assets, revenues and profits. This is consistent with the importance of manufacturing to ASEAN's overall growth models. The construction industry ranks at the top in terms of industrial size while finance, professional services, health and social services are at the lower ends. The rank orders of industries in terms of the number of firms, assets and revenues in each country appear similar. Profitability by industry tends to be high in manufacturing, construction, retail and education services. Manufacturing is the most profitable industry in Vietnam and Singapore and also ranks high in other countries. This is consistent with the findings in Chapter 3. Construction, wholesale and retail also rank high in most countries. In addition, the correlation coefficient between the rankings of industry-level profits by country turns out to be low, suggesting that the overall profitability rankings differ widely across countries. Taken together with the findings from Chapter 3, this suggests that the ranking of industry size is similar across the six major ASEAN countries, but the profitability of each industry differs significantly different from each other.
   Chapter 5 presents the directions of future research based on the preliminary analysis done in this study. Future research can be expanded to (1) building panel data by adding time dimension, (2) using lower levels of industrial classification, (3) using more target countries, and (4) covering un-listed firms.
   Dynamic industry analysis will enable Korean policy makers to make more effective strategic decisions for Korea-ASEAN economic engagement and to improve the quality of government support for the private sector in its expansion into the ASEAN market. The analytical results will help better identify potential sectors for economic cooperation and develop agenda for government-to-government interactions. They will also complement the current efforts by the government in producing and disseminating business information on the overseas markets, which usually covers macroeconomic conditions, political situations and trade structure and trends, and market regulations by adding industry-level analysis based on firm-level data.