Effects of NAFTA on US, Canada, and MexicoWon-Ho Kim·Moonsung Kang·Suyeob Na·Jin O Kim

The structure of the economic environment in North America has changed markedly over the last decade. Canada, which had long avoided free trade with the United States, pushed for the Canada-U.S. Free Trade Agreement (CUSFTA) which came into effect on January 1, 1989. In addition, the North American Free Trade Agreement (NAFTA) went into effect on January 1, 1994. The NAFTA has become one of the world`s best-known free trade agreements. It is also significant on the reason that for the first time ever, a dveloping country sat down with two industrialized countries and created an agreement that opens its economy to the challenges and opportunities of the North American marketplace. Seven years ago, three countries were in the midst of vigorous debate about the economic future of their own country. They debated whether they should open their economy to greater competition and secure a new set of rules to govern their trade relations with each other. The purpose of this research is to compare the real effects of the NAFTA with the economic outlook proposed before the NAFTA.

As a result of the NAFTA, trade volume in North America has incredibly increased. This feature is compatible with the main purposes of the NAFTA: (1) elimination of barriers to trade and (2) promotion of fair competition. The trade pattern in this region indicates that Canadian and Mexican trade-dependence on US is increasing in the recent years. Thus we expect that a rise or fall of US economy would directly affect Canadian and Mexican economies.

Fighting Against Laundering and Illegal Captial Flight in Korea-Case Study of FIUs and Policy Directions -
Hyungdo Ahn et al.

For the last 10 years, major countries around the world have endeavored to establish money laundering prevention system domestically on the one hand, and to pursue mutual cooperation by launching international fora on money laundering and encouraging other countries to adopt FIU system on the other. International fora such as UN, OECD, and Egmont Group have recommended the nations to introduce money laundering prevention system through the legislation of Anti-Money Laundering Act and the establishment of a Financial Intelligence Unit. In particular, OECD had set up the Financial Action Task Force on Money Laundering(FATF) in 1989 and all the OECD member countries except Korea and Poland have been participating in the activities. In 1995, Egmont Group has been formed to boost the cooperation among FIUs around the globe.

Korea will enforce the second-stage foreign exchange liberalization beginning January 2001. The former 'Foreign Exchange Management Act' took the role of preventing the flow of 'bad' money originated from the crimes and illegal capital flight. However, the implementation of the second-stage foreign exchange liberalization meausures would ease the manipulation resulting in the increase of money laundering and illegal capital flows. Therefore, Korea is in urgent need to introduce the FIU system.

This report intends to draw the blueprint for the Korean FIU system. The report surveys the current status of 21 FIUs around the world and proposes the FIU system which is appropriate to Korean society. Besides the enactment of Anti-Money Laundering Act, Korean should introduce three elements. First, a Financial Intelligence Unit(FIU) should be established to collect, analyze, and provide information on illegal financial transactions. Second, Suspicious Transactions Reporting System(STRS) should be introduced to require financial institutions to make reports on suspicious transactions. Third, financial institutions should establish internal reporting systems and training programmes to encourage and facilitate the reporting.

Since the South-North Summit, financing North Koreas economic development has become a major issue for the future of economic cooperation between the two Koreas. In order to tackle more systematically the problem of financing the expenses and draw implications for Korea, this study analyzes the experiences of the countries that have attempted a transition to the market economy system such as China, Vietnam and East European countries. Having explored the possibility of applying the lessons from the cases, this study suggests concrete plans for North Korea based on its realities and circumstances.

In the case of China in raising economic development expense, it analyzes Chinese policies toward the introduction of foreign capital, focusing on the interactions and linkages among foreign capital, the reform and open-door policy, and development strategies during different periods. The analysis of foreign investment in China examines the degree of its influence on Chinese economic development. China's reform and open-door policies were promoted fradually, unlike the countries of the former Soviet Union and Eastern Europe and succeeded in inducing foreign capital by establishing the special economic zones and open economic areas mostly in costal areas.

In the case of foreign capital importation in Vietnam, it begins with an examination of Vietnam's foreign capital inducing strategy, focusing on the reform process and policies on foreign capital, and analyzes the actual cases of foreign investment in Vietnam. Vietnam has promoted a positive policy for foreign investment since the adoption of the reform and open-door policy in 1986. However, there are still many constraints on improving relations with international financial institutions and Western countries, especially because of the US-led economic sanctions. With Vietnam's withdrawal from Cambodia in 1989, however, the Western countries began their advance into Vietnam in earnest, and the United States resumed dialogues with Vietnam for a peace settlement in Cambodia and Indochina in August 1990. The level of economic sanctions has been lowered as the United States offered a timetable for the normalization of diplomatic relations with Vietnam under the condition that the American MIA issue be settled.

East European countries pursued an aggressive transition to a market economy in the late 1980s and have achieved positive results in economic reforms since the mid 1990s. In the cases of East European countries, it first examines the process and characteristics of the economic reforms in East European countries, and makes a generalization about the foreign capital importation policies adopted and carried out to finance the expenses for economic development. Based on the categories of foreign investment, foreign capital importation in each country is analyzed in a concrete way.
The countries in transition undergo a comparable process of economic transformation. The directions of reform, however, vary according to the specific conditions such as industrial structures and international dependency. There are also differences in the methods to attract foreign investment required for the economic transition. China, characterized by a low level of industrial development and abundant resources, pursued an aggressive policy to attract foreign capital by establishing special economic zones and open economic areas. In contrast, the resource-poor countries in Eastern Europe which had attained a high level of industrialization, attracted international public funds from the early stage by implementing the IMF restructuring programs. The cases suggest policy directions for North Korea regarding how it should finance the development funds needed for economic recovery or possible reform and opening.

The policy that North Korea currently employs in order to induce foreign investment is based on the establishment of special economic zones where the rules of a market system are allowed. The outcome, however, has been deplorable for the last eight years since the adoption of the policy. Considering the limited scope of overseas national capital inflows, in contrast to the large inflow of overseas Chinese capital invested in Chinas special economic zones, it is not advisable for North Korea to finance its development expenses through the special economic zones. It is more realistic to attract international public funds in the process of restructuring North Koreas overall economic system and establishing and applying nationwide the rules of a market economy.

This study aims to propose negotiation strategies for Korea toward the WTO rules area, focusing on the issues in which major countries have shown deep interest and thus have a high possibility of being placed on the agenda of the WTO New Round. This study covers anti-dumping, subsidies and countervailing measures, rules of origin, Article 24 of GATT (1994), TRIPs and trade facilitation.
It is very hard to predict clearly whether anti-dumping will be included in negotiating agenda of the New Round. While most WTO member countries support the amendment or revision of the current WTO Agreement on Anti-dumping, the United States, the most influential country in the multilateral trading system, strongly opposes it. Nevertheless, considering the increasing trend of anti-dumping initiations since the launch of the WTO, we cannot exclude the possibility of anti-dumping issues being discussed in the New Round negotiations.

When the New Round deals with anti-dumping issues, Korea will have to suggest a strong proposal to restrain the abuse of anti-dumping measures. In that regard, it is important for Korea to lead the negotiation so that the WTO member countries agree on establishing far stricter rules or conditions on the initiation of anti-dumping. Upward adjustments of criteria for de minimis dumping margins and negligible dumped imports as well as clear criteria for the determination of dumping and injury are also expected to have similar effects.

At the same time, the current review system should be redressed so that the extension of anti-dumping actions can be properly restrained. Issues regarding anti-circumvention and retarded establishment of a domestic industry are also important for Korea.

In the area of subsidies and countervailing measures, major issues in the New Round will be: expanding the extent of non-actionable subsidies, granting more flexibility in using export subsidies to developing countries, preventing abuse of countervailing duties as well as subsidies on fishery and investment incentives. Among these issues, it is desirable to put priority issues related to non-actionable subsidies and export subsidies on developing countries. Progress on these issues, in which most developing countries show interest, is helpful for the success of the New Round. In order to prevent negative impact on Korea's exports, the Korean government needs to focus on raising the conditions on de minimis and environmental subsidies. The government needs to be cautious regarding other issues, since they will be dealt with in other areas such as investment, environment and anti-dumping.

The importance of the principles that apply to the origin of products is growing following the current world economic situation, including multinational firms and the outsourcing of materials. The harmonization of nonpreferential rules of origin is under way in the WTO. However, the interests of member countries are very different and the process can not build consensus. Therefore, the conclusion of the process is considered as on the agenda at the WTO New Round. If the harmonized nonpreferential rules of origin are made as the result of the WTO New Round, they will work as the standards of the decision of most favored nation, anti-dumping, safeguard and other important trade- related rules. Therefore, the Korean government should form a task force including experts from the business world to formulate its own position in the negotiation of rules of origin.

The number of regional trade agreement that were notified to the WTO reached 209 as of October 1999 and the amount of trade within RTAs accounts for over 50% of world trade. Therefore, some member countries insist that the revision of WTO rules related to regional trade agreements to improve the transparency and guarantee WTO consistency of RTAs should be included in the WTO New Round. The Korean government should join them to clarify the WTO rules and assure the national interest from the overflow of regional trade agreements.

The built-in agenda regarding the TRIPS Agreement in the New Round consists of issues concerning geographical indications, protection of biological diversity, provision of protection to life forms, and exemption of patent protection for essential drugs. Furthermore, developing countries are likely to raise new issues such as renegotiation to extend the grace period, provision for the protection of traditional intellectual property rights and strengthening of technology transfer as well as technical cooperation. While developed countries are reluctant to renegotiate the TRIPS Agreement, they are interested in its revision to reflect the advancement in areas such as electronic commerce.

In general, the strengthening of intellectual property rights would induce innovation in a country such as Korea, which has achieved some level of technological development. Rather than resisting the implementation of TRIPS, therefore, it would be desirable for Korea to support further innovation and protection of intellectual property rights through various institutional reinforcements. Most importantly, related policy and negotiating strategies must be formed based on solid empirical studies on the effect of the strengthening of intellectual property rights on innovation and the economy, rather than as reluctant response to pressures from major trading partners.

The WTO discussions on the trade facilitation issue, which was initiated at the 1996 Singapore Ministerial Conference, can be characterized by the conflicting positions of two camps. The EU proposes that the WTO establish comprehensive trade facilitation rules, while the US and Japan have put emphasis on revising the existing WTO rules related to trade facilitation. Korea should propose that the WTO establish the rules on trade facilitation covering general principles. However, considering such conflicts and respecting the previous activities of international organizations including the WCO, it would be desirable that the WTO rules not cover all detailed issues that were already prescribed by international conventions, including the Kyoto Convention. New rules on trade facilitation, if agreed to, will have to include the generally-raised issues such as simplification of official procedures and documents, automation and modernization of customs, introduction of Electronic Data Interface, improved transparency of domestic regulations, audit-based customs control, among others.

To summarize, the anti-dumping and TRIPs issues will have the most important effects on the Korean economy. Korea needs to make sure that the basic framework of the rules of origin and trade facilitation be set up to the benefit of Korean exporting enterprises. For the subsidies and countervailing measures and regional trade arrangements, Korea needs to play a bridging role in coordinating the conflicting interests of the developed and developing camps. Korea will have to review the priorities of rules area and decide its negotiation strategies.

This study aims at evaluating the economic effects of the liberalization of trade in services on the Korean economy. Among the various economic effects, it focused on spillover effects of services liberalization on other sectors including manufacturing.

The liberalization of services is presumed to bring productivity gains in the service sectors and also in the manufacturing sectors which use liberalized services as inputs. By examining the changes in productivity of the service and manufacturing subsectors in 1970-97, we found that liberalization may have positively contributed to the productivity of the liberalized service subsectors.

The total factor productivity in 'distribution, etc.,' as well as in 'transport and communications' which were liberalized since the mid-1990s improved in 1995-97. In contrast, 'finance, etc.,' which had been nearly closed until the late 1990s, showed negative total factor productivity growth rates throughout the periods studied.

Liberalization of trade in services is also presumed to have a positive impact on macroeconomic variables. Constructing some indices of restrictiveness of trade in each services subsectors, we simulated the effects of services liberalization using the Computable General Equilibrium (CGE) model. The results show that liberalization of trade in services in Korea since the Uruguay Round increases real GDP by 0.79 percent. The consumer price index falls by 1.41 percent. Above all, welfare gain to consumers is a 1.91 percent increase in the total utility. Liberalization of trade in services also increases investment and employment in the manufacturing sector, especially in textile and clothing as well as petroleum and coal.

Considering these positive effects of liberalization of trade in services on the domestic economy, it is in the interest of the Korean economy to continue the liberalization process and refrain from retreating. As entry barriers have been widely removed, most remaining obstacles are the internal barriers faced by both foreign and domestic suppliers. Removing these barriers is more complex because they are part operating practices, part regulation and part cultural.

In particular, the ambiguous tax laws as well as cumbersome regulations are regarded as the most serious impediment to foreign investors. This implies that deregulation should focus not only on reducing the number of regulations but also on enhancing transparent enforcement. In the process of deregulation, the government should also be attentive to reducing the excessiveness of regulations for fulfilling their objectives.

Another important area which has not been adequately addressed is labor market inflexibility. The limitations on layoffs may discourage foreign service suppliers from establishing local subsidiaries, which otherwise can create employment. Establishing an adequate social safety net and effective retraining programs is thus needed not only because it enhances labor market flexibility but also because it enables the government to liberalize mode 4---temporary entry of service providers.

A CGE Analysis of the WTO New Round Market Access Negotiations in Merchandise Trade Based on the Six Scenarios and Korea's Negotiation StrategiesNakgyoon Choi· Myung Heon Lee·Moon Bae Joo

The possible approaches to the WTO market access negotiations in merchandise trade are expected to be the following: (i) an across-the-board cut, (ii) formula approaches including the Swiss formula and the EU tariff harmonization formula, (iii) request and offer, and (iv) zero for zero.

This study sets up the CGE (Computable General Equilibrium) model, analyzing the economic impact of multilateral tariff reductions based on the six possible scenarios. The CGE model covers 8 countries (Korea, USA, Japan, the European Union, Canada, China, ASEAN, rest of the world) and ten industries (agriculture, forestry and fishing, mining, food and beverage, textile and clothing, petrochemicals, steel, electronics and machinery, transport equipment, other manufacturing, services).

The simulation results reveal that Korea, China, ASEAN and Japan will be the winners in the market access areas if the tariff peaks as well as the nuisance tariffs are eliminated in the WTO New Round. The results also indicate that: (i) the Swiss formula to set a to be 10, and (ii) the tariff harmonization to eliminate the international tariff peaks as well as the nuisance tariffs below 3 % will be the best alternatives for the Korean economy.

In this context, the Korean government will be expected to make its best efforts in the WTO's decision-making processes concerning tariff reduction techniques, on which WTO Members economic interests will heavily depend. It will be urgently necessary that WTO Members cooperate with each other to make sure that the target of market access negotiations be the reduction of the average tariff rate, elimination of the tariff peaks and the alleviation of the tariff escalation system. For its part, Korea will have to prepare to revise its domestic nontariff as well as tariff systems. In addition, the Korean government will have to expand domestic support for trade and investment liberalization because the WTO New Round will substantially affect various domestic interest groups.

The Prospects for the WTO New Round Negotiations and Schemes for Improvement of Koreas' Negotiation Stance Wook Chae·Nakgyoon Choi The expectation of a successful launch of the New Round came to a halt due to disagreement of related parties at the Seattle Ministerial Conference(Nov. 30 - Dec. 3, 1999). The efforts to facilitate the initiative of the New Round by WTO and individual members have not yet materialized. As of now, it is expected that the New Round will come to the picture once the fourth WTO Ministerial Conference is held in late 2001. However, it should be noted that the launch of the New Round near the end of 2001 is plausible only under the premise that the gap in interests among the WTO member countries are narrowed. (The rest is omitted.)

Analyses and Policy Implications of the WTO New Issues
Introduction New trade issues are issues, which are not fully specified in the current trade agreements and are currently under discussion, or have a high probability of being included in the agenda for discussion. This report analyzes and draws out policy implications for six new issues: trade and environmental protection; transparency in government procurement; trade and competition policy; multilateral discipline on investment; trade and labor standards; and electronic commerce.

Trade and Environmental Protection During the UR negotiations, the interrelationship between trade and environmental protection became an important issue for the international community. From 1995, trade and environmental protection issues have been discussed in the Committee for Trade and Environment, one of the permanent committees of the WTO. Also, additional liberalization of environmental services has been under discussion since the beginning of 2000 as a part of the built-in-agenda, and Korea needs to develop an appropriate policy position on the matter.

So far, the discussion of trade and environmental protection in the WTO has concentrated on the following issues: Effects of environmental protection policies on trade; effects of trade liberalization on the environment; and the subsumption of international environmental agreements under the framework of the WTO. The core of the dispute between the WTO members has been the concerns by the developing countries that environmental policies will be used as a protectionist tool, versus the desire of the advanced countries to enforce tougher domestic and international environmental standards. From the standpoint of smaller open economies which have difficulties dealing with the issue bilaterally, it is desirable to include environmental issues in the multilateral trade agenda, since the inclusion will give the smaller economies a larger voice in the discussion.

The additional liberalization of environmental services should be considered favorably since it will allow inflows of advanced environmentally-friendly technologies and foreign capital, which will in turn, help increase the competitiveness of domestic environmental industries. Also, changes in domestic environmental policies, such as introducing new self-regulated environmental standards, and introducing policies which use the market mechanism would increase the positive effects from liberalization. Considering the positive benefits from the domestic market liberalization coupled with more environmental exports abroad, the liberalization of domestic environmental services market should be considered favorably.

Transparency in Government Procurement According to various sources, the size of the government procurement markets for most countries are approximately 10∼20% of the GDP. Despite the size of the market, the multilateral trade disciplines on the government procurement are weak. Four multilateral WTO documents deal with trade in government procurement: GATT, GATS, Government Procurement Agreement (GPA), and the Agreement on Transparency in Government Procurement (Transparency Agreement), which is currently under discussion in a working group. While there has been discussions on the desirability of a multilateral agreement on government procurement, it was recognized that it would be impossible to impose the disciplines of the GPA, currently observed only by a few members of the WTO, on all the members of the WTO. Thus, in order to reduce corruption, the members decided to focus only on the matters concerning transparency. As a consequence, the Transparency Agreement deals only with rules on transparency, and does not deal with market access or market openness. Special advantages for domestic suppliers would be permitted as long as such advantages are acknowledged in a transparent manner.

It is likely that the Transparency Agreement will eventually develop into a multilateral agreement on government procurement, which would include market access and openness. Member countries have taken their positions for or against the position based on this possibility. Currently, there is a high probability that the transparency in government procurement will be chosen as one of the New Round issues. Before the suspension of the Seattle Ministerial Meeting, in the last informal draft of the Ministerial Statement, transparency in government procurement had been chosen as one of the New round topics. However, the inclusion of the issue does not mean that members enthusiastically support transparency in government procurement. Rather, the issue was probably included because, of all the major new issues under discussion, it was one of the least controversial.

As for the actual details of the Transparency Agreement, some members argue that the agreement should specify various requirements in detail to make sure that transparency is maintained, while other members argue that if the Agreement is too detailed, it will reduce the flexibility and responsiveness of the government entities, and so the Agreement should spell out only the ideals and first principles.

Currently, the Korean exports to foreign government procurement markets are low, and are made mostly to governments which are not signatories to the GPA. Because Korea is a signatory to the GPA, Korea already maintains a fairly high standard of transparency in government procurement. Thus, the Transparency Agreement is not likely to impose additional regulatory burdens on the government entities, and government procurement related imports are not likely to increase substantially. However, the increased transparency and access to information for other countries may help Korean suppliers further develop the foreign government procurement markets, especially in the developing countries which are not signatories to the GPA. However, it should be noted that the Transparency Agreement is not likely to have a major effect on Korea's government procurement-related exports. Improvements in technology and competitiveness of Korean exports will be more helpful in increasing Korea's government procurement-related exports much more than the Transparency Agreement.

Trade and Competition Policy While traditional barriers to trade at the border, such as tariffs and quotas seem to be on the decline under the WTO, attention is increasingly focused on internal measures such as competition policy, with the recognition that anti-competitive activities of firms and market concentration may act as trade barriers. The differences in competition laws and policies among different countries, lack of comprehensive competition laws or insufficient enforcement in some countries, and jurisdictional conflicts may all lead to trade frictions, calling for an international regime on competition policy.

At the WTO, discussion on this issue began with the establishment of the "Working Group on Competition Policy" at the First Ministerial (December 1996). Although some members had sought to include competition policy as the new agenda in the New Round, there is as yet, no consensus. EU has been the most enthusiastic. EU proposes that member countries should first agree to a core principle with a minimum of substantive rules in the coming New Round, and then expand the scope of substantive rules in subsequent rounds of negotiations. Critically, US does not agree that a binding multilateral rules under the WTO is an appropriate forum to develop international cooperation on competition policy. In particular, US opposes application of competition rules to anti-dumping measures, which has been the main interest of certain members. US would prefer non-binding rules, under a new international forum which does not particularly focus on trade related issues.

Developing countries, are also unenthusiastic. While acknowledging that an international competition regime would help to regulate antic-competitive activities of multinationals, they are concerned that it may conflict with their development or industrial policies, and that developed countries could use it to mount trade liberalization pressures. However, depending on the special and differential treatment allowed for developing countries, they may support including competition policy as a new issue.

Korea has consistently supported developing an international competition policy agreement within the WTO. At first, Korea's main interest was that a competition agreement will help anti-dumping measures to be considered from competition policy perspective. However, anti-dumping issues should not be emphasized at this point, since it will only provoke US opposition against including competition policy in the new round. Rather, Korea should expend greater energy on developing dispute resolution mechanism suitable for competition policy. Further, Korea should not argue for a too strong agreement; while a competition agreement would not necessitate legislative burdens, an agreement too stringent on enforcement would put Korea in the defensive.

Finally, Korea should have a clear strategy with respect to what compensation it can negotiate by conceding, in the event competition policy is not included in the New Round.
Multilateral Discipline on Investment In the 1990s, multilateral discipline on investment has become an important topic in the international economy. When the negotiations for MAI broke down in the OECD, attention focused on the WTO discussions on investment. The core of the conflict in multilateral discipline on investment in the WTO lies in the differences of opinion between the advanced and developing countries. In order to establish a multilateral agreement on investment in the WTO, the developing countries which currently oppose the multilateral discipline, must be convinced to change their views.

In the case of foreign direct investment, the views of the advanced and developing countries can be summarized as the views of the countries which invest abroad versus the views of the countries which seek to attract foreign investment. Thus, the interests between the parties naturally differ. However, in order to establish a transparent, stable and predictable international investment environment, conflicts arising from such differences must be resolved. To gain good results from the discussions on multilateral investment agreement, the advanced countries must make sure the developing countries understand the meaning of the agreement, and allow them to fully participate in the discussions and negotiations. Korea should submit to the Working Party on Trade and Investment a concrete proposal detailing the direction and the structure that the multilateral investment agreement should take. Also, in order to facilitate the participation of the developing countries in the discussion, the investment agreement should encourage economic development, and should include provisions on the relaxation of regulations on the part of the investor countries.

Trade and Labor Standards At the Singapore Ministerial in 1996, the WTO member countries reaffirmed that the ILO was the appropriate organization to deal with labor issues, thus more clearly defining the role of the WTO. Currently, the WTO is pursuing no projects dealing with labor. However, in the Seattle Ministerial, the problem of trade and labor standards became one of the main items of attention. The international labor community and the United States has taken the position that WTO should deal with the interrelationship between trade and labor standards as a New Trade Issue. However, the majority of developing countries, as well as user groups in developed countries are opposing the inclusion of labor issues.

The pro-labor groups advocate that the following four labor basic standards be tied to trade: right to form an association and engage in collective bargaining, prohibition of discrimination, prohibition of child labor, and prohibition of forced labor. These four standards are a part of ILO's eight basic labor standards. Korea currently has ratified only three of the eight basic labor standards, lagging substantially behind the rest of the world. Korea is especially weak in the right to form an association and engage in collective bargaining. Because of the political and economic interests among developed and developing countries, the issue of trade and labor standards are not likely to disappear. The WTO Agreements currently contain no provisions on labor standards. A few developing countries argue that as a first step in incorporating labor issues within the context of the WTO, there needs to be studies dealing with the interrelationship between trade and labor standards.

According to these countries, if the labor standards are made a part of the WTO Agreements, they would act as incentives to improve working conditions in the member countries. However, the majority of the developing countries and some developed countries believe that WTO has no jurisdiction to deal with labor issues. According to these countries, labor issues will merely serve as a context for protectionist policies. Developing countries believe that labor issues are merely an excuse for the developed countries to eliminate the comparative advantage of the developing countries, which depends on low wages. Thus, it seems unlikely that the problem of trade and labor standards will be settled quickly.
A possible alternative is for the WTO and ILO to establish a joint permanent forum to examine the relationship between trade and labor standards. Korea should support this alternative. In the examination process, Korea should refrain from advocating direct sanctions against those countries which do not obey the international labor standards, but rather take the middle course, and insist that warnings be issued to the countries which violate international labor standards, and these warnings should be issued in parallel with international aid to improve labor standards.

Electronic Commerce To foster the expected growth of electronic commerce, a WTO agreement should establish a basic legal framework for international transactions to guarantee a stable and predictable environment. However, the members have not yet been able to form a consensus on the definitions, classification, technological neutrality, and domestic regulations dealing with electronic commerce. Problems dealing with electronic commerce using digital transfers, especially classifications of electronic transfers, are the most difficult of the outstanding problems. If digital transfers are classified as goods, then it is subject to the General Agreement on Tariffs and Trade (GATT), whereas if the transfers are classified as services, then it is subject to the General Agreement on Trade in Services (GATS). However, digital transfers share characteristics of both goods and services.

Thus, there is controversy regarding whether electronic commerce should be subject to GATT, GATS or some other WTO Agreement. If electronic commerce is subject to GATS, then the members can regulate electronic commerce according to the provisions of GATS. Thus, based on its provisions on domestic regulations, general exceptions, and concessions of each countries, the members can enforce the MFN and national treatment principles. However, if it is subject to GATT, the members cannot enforce these principles. EU has advocated the position that electronic commerce should be subject to GATS, but the US and Japan argued that electronic transfers of contents which have physical equivalents, such as movies and books, are goods which are subject to GATT.

During the UR negotiations, no one imagined the current on-going expansion of electronic commerce. Thus, there is a question of whether the members must grant the same level of liberalization that they had promised in distribution, financial services, consulting services, and other services based on the principle of technical neutrality, regardless of the means of supply, including when the means of supply is through the internet. Some developing countries have argued that, because the potential effect of electronic commerce is so large, the existing agreements should be re-examined.
The discussions on electronic commerce, which had been on hold after the Seattle Ministerial, is due to begin again in a special working group of specialists from the beginning of 2001. The results of the discussion, as well as recommendations from the working group will be submitted in the next WTO Ministerial.

Korea's use of electronic commerce is growing very rapidly. Infrastructure needed for a digital economy, such as telecommunications services, hardware and software are also developing quickly. The levels of commercial application, and technology are increasing, and the prospects for further development seems bright. Considering such prospects, coupled with Korea's export orientation, Korea should emphasize "free trade in electronic commerce" as a basic policy position, and form policies accordingly.

Conclusions and Policy Implications Korea, EC, Japan along with other member countries support comprehensive negotiations, dealing not only with market access, but also with legal issues. Agricultural exporters such as Australia and the rest of the Cairns Group are placing their main emphasis on agricultural negotiations, and the developing countries are placing importance on implementation of provisions on special and differentiated treatment in current WTO agreements. India, Egypt, Malaysia and other large developing countries have placed more importance on the implementation of current WTO agreements than on the New Round, and are maintaining their position against the inclusion of environmental, labor, investment, and competition policy issues in the New Round negotiations.

On the other hand, the US has advocated the inclusion of only the core issues of market access and a few particular issues of interest to the US such as labor and environment. It has opposed the renegotiation of the Anti-dumping treaty which most members favor. However, the new Bush administration may bring changes in the US position. Since the Bush administration is more flexible with respect to labor and environment issues in the New Round, these issues are not likely to be included, and the formal start of the New Round is more likely. Transparency in government procurement and electronic commerce in services seem very likely to be included in the New Round. The US, EU and Japan support the inclusion of electronic commerce. Competition policy, multilateral discipline on investment and other new issues do not seem likely to become formal topics for the New Round, and will probably remain as areas for continuing studies. No matter which new issues are selected as topics for the New Round, Korea needs to act flexibly to make sure its voice and reasoning is heard, and reflected in the final agreements.

Trade and Divestment profiles in the ASEM Process: Issues and ProspectsChong -Wha Lee

Since its inception, the ASEM process has achieved considerable success with a host of ministerial meetings, senior officials' meetings, and a plethora of activities. The 3rd ASEM Summit in Seoul laid a solid foundation for moving the ASEM process forward, adopting the Asia-Europe Cooperation Framework 2000, a blueprint for future ASEM meetings and several new initiatives for forging ahead towards the information age. However, when the actual achievements of the meeting are examine[1, they show that ASEM has made little progress, especially in strengthening the open multilateral trading system embodied in the WTO. (The rest is omitted.)

Environmental Measures of Major Advanced Countries and Their Impact on Korea
Currently, trade-environment discussions in OECD countries are relatively slow as PPMs based trade measures seem to be rejected by the Multilateral Trading System. However, environmental measures with impact on trade are becoming more stringent so Korea's export competitiveness in international markets are eroding. (The rest is omitted.)