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Patent Infringement and Strategic Trade Policies: R&D and Export Subsidies
Given the idea from my previous research that the R&D subsidy issue must be considered with IPR protection, we examine policy choices when a government chooses both R&D subsidies and IPR protection levels simultaneously. U..
Moonsung Kang Date 2000.11.30
Trade policyDownloadContentSummaryGiven the idea from my previous research that the R&D subsidy issue must be considered with IPR protection, we examine policy choices when a government chooses both R&D subsidies and IPR protection levels simultaneously. Under the circumstance, it will choose a sufficiently weak level of IPR protection that its optimal R&D policy choice will be a subsidy. Hence when both IPR protection and R&D policy choice are modeled, the case for an R&D subsidy remains, but for very different reasons than those of the original strategic R&D subsidy logic.
That is, we show that it will be optimal for the domestic government to adopt IPR protection which is sufficiently weak that, in light of this weak IPR protection, it will also want to subsidize the R&D investments of the domestic firm, so as to induce R&D investment of the foreign rival firm to rise as well, which in turn increases the profits of the domestic firm.
Like the original Spencer-Brander result, the R&D incentives that we identify lead governments to set positive R&D subsidies in the non-cooperative equilibrium. However, we find that if exporting governments could cooperate over their policy choices they would continue to subsidize R&D, rather than agreeing to tax R&D as in the original Spencer-Brander setup. The reason is that under cooperation they will also agree to share perfectly the results of R&D investments (i.e., eliminate IPR protection), and R&D subsidies are then required to maintain appropriate incentives for firms to engage in R&D investments. This last result is interesting for two reasons, both of which point to the importance of examining R&D subsidies and IPR policies in tandem as we have done rather than in isolation as has heretofore typically been done.
First, by this result we show that the case for strategic R&D subsidies is more robust than previously thought, as it applies whether exporting governments are acting cooperatively or non-cooperatively, once their equilibrium choices of IPR protection are taken into account as well. And second, by this result we identify a puzzle as to why governments might wish to agree to jointly eliminate, rather than tighten, their levels of IPR protection, given that they have at their disposal R&D subsidy policies to offset the disincentive effects of agreements to share R&D outcomes. We show that the flavor of these findings extend as well to the case in which governments also have export policies at their disposal. In the original Spencer-Brander setup, the addition of export policies leads governments to tax R&D and offer export subsidies, pointing to another way in which the case for strategic R&D subsidies appears to be fragile. But again our results imply that this fragility disappears in a setting in which the choice of IPR protection is modeled as well. -
Northeast Asian Economic Cooperation and Korean Integrative Development
The scheme of Northeast Asian economic cooperation is a major variable to diminish the deterrent potential of the powers against the economic integration as well as the unification in the Korean Peninsula. In view of the current N..
Yong-Suk Oh Date 2000.11.25
Economic cooperationDownloadContentSummaryThe scheme of Northeast Asian economic cooperation is a major variable to diminish the deterrent potential of the powers against the economic integration as well as the unification in the Korean Peninsula. In view of the current Northeast Asia's political and economical power relations, however, there seems to be no way to attain either two Koreas' economic integration or their unification. As the economic integration or national unification is delayed, the chance of the Korean integrative development will be farther away and their unification cost will be larger. It is why the Korean themselves must positively search for ways of their economic integration and national unification.
A model of "pervasive bases-linking and development" suggested in this paper is a way of starting for two Koreas' economic integration, which is approached by three stages. At the first stage, North Korea's open districts and its counterpart areas in South Korea are to be designated as bases for the partial integration. In the second stage, these bases are developed as the central zones of growth in the scheme of Northeast Asian economic cooperation. And finally, such zones are to be increased in number.
The unification should be attained with minimizing the deterrent potential of neighbor countries as well as minimizing its cost. To suffice these conditions, it seems desirable for the unification to begin with the model of "one-country two-system" and then to be developed step by step.
The integrative development of the unified peninsula should be pursued so as not only to complete the economic, social and land integrations but also to harmonize the internationalization or globalization with localization. The designing of four outward development zones and one inland axis are needed in this context. Four outward development zones are the Northern area toward Eurasia, the Pan-Yellow Sea area toward China and Southeast Asia, the Pan-East Sea area toward Japan, the Far East of Russia, and the South Sea-Jeju area toward the Pacific Ocean.
According to it, a Five-Ju System is suggested as a new great-administrative partition in the unified peninsula. The five Ju's are Guanseo Ju linking the Pan-Yellow Sea economic sphere with Eurasia, Guanbuk Ju linking the Pan-East Sea economic sphere with Eurasia, Giho Ju as a central area of the Pan-Yellow Sea economic sphere, Taebaek Ju as a central area of the Pan-East Sea economic sphere, and Namhae Ju linking both the economic spheres of the Pan-Yellow Sea and the Pan-East Sea with the Pacific Ocean area. And the unified peninsula would have a firmer ground for integrative development as each Ju's development plan is implemented for the purpose of strengthening nucleus management functions of local mega-cities to fit this spatial framework. -
OECD Regulatory Reform and Country Review of Korea: Recommendations and Their Implementation
The OECD has engaged in research on regulatory reform since 1995 in the belief that inefficient regulations lower the economic growth of its member countries. In 1997, the OECD issued a report on regulatory reform, and submitted ..
Junsok Yang et al. Date 2000.11.15
DownloadContentSummaryThe OECD has engaged in research on regulatory reform since 1995 in the belief that inefficient regulations lower the economic growth of its member countries. In 1997, the OECD issued a report on regulatory reform, and submitted it to the ministers. The report strongly emphasized public sector reforms, competition policy, and market openness, which also reinforce each other through synergy effects. The ministers authorized the OECD to review the regulatory structure and regulatory reform of the member countries, based on the results and the recommendations of the 1997 report. In 1999, the OECD reviewed Korea's regulatory structure and regulatory reform, and their report was published in June 2000.
In the past, Korea's regulatory structure was known to be excessively complex and inefficient. After the Asian financial crisis, the newly elected Kim Dae Jung government targeted regulatory reform as one of the top policy priorities of the government and engaged in a massive regulatory reform program. A comprehensive system for reviewing newly submitted and existing regulations were introduced, and in 1998, 50% of existing regulations were eliminated.
In its report, the OECD generally praised Korea's regulatory reform as being one of the most ambitious reforms among member countries. The report also states that the reforms should vitalize the economy. Among the specific measures praised by the OECD were the establishment of the Regulatory Reform Commission which oversees the regulatory reform process, the introduction of Regulatory Impact Analysis, the establishment of the Financial Superviory Commission which is Korea's first independent and comprehensive regulatory agency, Korea's comprehensive competition policy framework, and the removal of trade and investment barriers.
However, the OECD notes that Korea's regulatory reform is only in its infancy. The problems of chaebol and market competition, the reform of social regulations, as well as the elimination of government intervention in the economy are some of the tasks remaining. The report noted that Korea's tradition of government intervention has its roots in Korea's development process, and it will be difficult to remove the strongly held habit of intervention. Furthermore, the OECD also strongly noted that the reform effort seems to be slowing as the Korean economy recovers from the Asian financial crisis. The report warns strongly that should the reforms slow down, Korea's future growth will be threatened.
The OECD report also states that, while the deregulation drive of 1998 and 1999 did much to help the economy, its overemphasis on numerical targets may have lessened its impact. Thus, Korea must raise the quality of its regulatory reform program, so that the impact of regulatory reform on the economy is maximized.
The OECD report recommended that the authority of the Regulatory Reform Commission be increased so that it can pursue regulatory reform in a more comprehensive fashion. The report also recommends that the results of Regulatory Impact Analysis be made public, and that public organizations and NGOs should be more encouraged to participate in the regulatory review and reform process.
The OECD also criticized the emphasis of Korea's competition policy, which placed too much attention on reducing the powers of chaebols through chaebol-specific policies and measures. The report worries that such specific measures will worsen government intervention in the economy, as well as taking resources away from maintaining competitive market environment, which should be the true focus of competition policy. The report recommends that Korea deal with the chaebols by maintaining a competitive market environment, while enforcing transparency and strong corporate governance rules.
The report emphasized that further opening Korea's markets, as well as letting foreigners participate in the regulatory review and reform process will help increase the transparency of the economy. The report also recommends Korea's technical standards should be conformed with international standards. Korea's past development was largely dependent on increases in production inputs such as labor and capital. However, Korea can no longer count on increases of labor force and capital stock as engines of growth. Thus, Korea must improve its productivity if its growth is to continue into the future, and regulatory reform is a crucial component in the effort to raise the productivity of the economy. -
Korea and Brazil: A Partnership for the New Millennium
Brazil, the fifth largest nation in the world, and possessing a population of 160 million, is the world's eighth largest economic power and leader of the South American market. During the Cold War, both Brazil and South Korea mai..
Won-Ho Kim ed Date 2000.10.31
Economic cooperationDownloadContentSummaryBrazil, the fifth largest nation in the world, and possessing a population of 160 million, is the world's eighth largest economic power and leader of the South American market. During the Cold War, both Brazil and South Korea maintained very cooperative relations in political terms, however, their economic relations were quite limited. Brazil's import-substitution industrialization strategy, from the 1960s through 1980s, and the prevalence of macroeconomic instability there, in the late 1980s, led to protectionist trade measures that hindered both countries' attempts at further developing their economic relations. In the 1990s, however, the reformist governments in Brazil and its neighbors chose to focus on open-regionalism strategies, and established the Southern Common Market (MERCOSUR). While taking advantage of the economies of scale resulting from this regional integration, Brazil has continuously promoted market-oriented economic reforms. As the leader of MERCOSUR, Brazil has forged free trade accords with Chile and Bolivia, as well as with other major South American economies. All this has helped Brazil to emerge as a dynamic force in the world economy. Although Brazil recently suffered from a financial crisis resulting from an overwhelming accumulation of foreign debt and the confidence-loss effect caused by the Asian financial crisis, its economic dynamism was strong enough to allow Brazil a rapid recovery. The annual inflow of more than $20 billion in foreign direct investment firmly indicates that the economic growth of the country has not lost any momentum.
In the spirit of continued cooperation, the Korea-Brazil 21st Century Commission, created as a result of President Kim Yong Sam's visit to Brazil in 1996, during its first four meetings and parallel academic conferences, held alternately in Korea and Brazil, decided on a number of fields to be jointly developed by both countries. Notable progress has resulted from the Commission's coordination of the exchange of intellectuals and experts from a vast array of fields of mutual interest. The proposed science, technology and industrial cooperation fund, visa exemption accord, and summit meeting are already in sight.
This book is a compilation of numerous papers and presentations submitted by Korean and Brazilian scholars, and discussed by the Korea-Brazil 21st Century Commission members. Several new articles have been added, and others have been re-edited and updated since their initial presentation. We would like to give our special thanks to the esteemed members and coordinators of the Korea-Brazil 21st Century Commission for their insightful, wise and expert contributions, through all stages of this project, and to all those who put a great deal of effort into this book. It is my sincere hope that this publication provides both useful information and ideas that will assist in the building of further mutually cooperative and rewarding relations between Korea and Brazil, while also serving as a valuable academic resource. -
Developing and Implementing International Standards and Codes to Enhance Transparency
After the recent global financial crisis, the international community has endeavored to strengthen the international financial architecture. International financial and standard-setting institutions such as the IMF, the World Bank..
Young-Gon Park et al. Date 2000.10.30
DownloadContentSummaryAfter the recent global financial crisis, the international community has endeavored to strengthen the international financial architecture.
International financial and standard-setting institutions such as the IMF, the World Bank, the Basle Committee, the OECD, the International Organization of Securities Commissions (IOSCO), the International Association of Insurance Supervisors (IAIS), and the International Accounting Standards Committee (IASC) have developed numerous international standards and codes in such areas as data dissemination, fiscal transparency, transparency in monetary and financial policies, banking supervision, corporate governance, securities market regulation, insurance regulation, accounting and auditing. However, most importantly, every country will need to follow these international standards and codes. In following these standards and codes, policy-makers will enhance their responsibility, which will lead to more skillful policy design.
Furthermore, market participants including investors will have access to accurate country specific information on the economy. The information will not only be helpful to investors, but ultimately lead to the stabilization of international financial markets and the improvement in the international financial architecture.
However, due to the disparity in the economies of various countries, a unified set of international standards and codes applicable to every country will be difficult to develop. International standard-setting organizations are in the process of developing such general standards and codes, yet whether every country will be able to comply is questionable. Therefore, rather than forcing every country to follow these standards and codes, the new financial architecture must devise an inducive alternative based on market pressures and see to it that international standards and codes are evaluated regularly, accurately reflecting market. Countries will then find it easier to observe the set of standards and codes.
The IMF is currently preparing the Reports on the Observance of Standards and Codes (ROSC) based on countries willing to participate. According to two case studies conducted by the IMF on 10 countries in 1999, some countries such as the United Kingdom, Australia, and Argentina actively participated in the evaluation of their observance of international standards and codes. However, the majority was apprehensive of participating in such practices. This is because some countries regard the IMF's evaluation on standards and codes as an opportunity to enhance their transparency, while a lot more countries are still afraid to disclose to the public their economic situation. Korea has acknowledged its willingness to participate in the preparation of the ROSC by the IMF in the first G-20 meeting held in December 1999. Korea has realized the importance of transparency through its currency crisis experience.
Consequently, Korea has applied the BIS capital adequacy ratio to banks, and EU solvency margin to insurance firms. Accounting and auditing standards have also followed international standards and codes. Such reform, accompanied with participation in the preparation for the ROSC will improve Koreas transparency, and furthermore, enhance Koreas credibility in the international community. -
Review of APEC's IAPs: Competition Policy and Deregulation- Focussing on Non-OECD Economies of APEC
This paper reviews and evaluates Individual Action Plans (IAPs) of the non-OECD member economies of APEC. APEC adopted a unique modality of trade and investment liberalization and facilitation, called IAPs. Individual member eco..
Hyungdo Ahn et al. Date 2000.10.30
DownloadContentSummaryThis paper reviews and evaluates Individual Action Plans (IAPs) of the non-OECD member economies of APEC. APEC adopted a unique modality of trade and investment liberalization and facilitation, called IAPs. Individual member economies announce their liberalization plans unilaterally and voluntarily.
Then, they jointly review the IAPs and their implementation to encourage the member economies to achieve measures to be carried out over the immediate, medium and longer term in fifteen specific areas.
This paper focuses on competition policy and deregulation. Competition policy is included in IAP to enhance the competitive environment in the Asia Pacific region through the review of respective competition policies, implementation of technical assistance, and establishment of appropriate cooperation arrangements. Deregulation in IAPs is to promote transparency of regulatory regimes in APEC member economies and eliminate the distortion arising from domestic regulations. In particular, the focus is on the trade and investment effects of domestic regulations.
There is a growing consensus that competition oriented policy framework would be instrumental in achieving the Bogor goal of trade and investment liberalization. But at the same time, there is no consensus on the specific goals or scope of competition policy among member economies because they are at various stages of industrialization, and have different institutional, legal and cultural heritages. This is evident in the IAPs submitted by member economies. To partly resolve the problem of lack of a common principle in the area of competition policy among APEC member economies, the APEC Principles To Enhance Competition and Regulatory Reform was adopted in September 1999 at the Auckland APEC Leaders Meeting.
Similarly, IAPs for deregulation is limited in advocating comprehensive regulatory reform in the economies studied under the current APEC charter. While many countries carry out comprehensive program of regulatory reform, including deregulation, to improve efficiency of business and government, and raise consumer welfare, APEC's deregulation deals mostly with market opening deregulatory measures. Thus, APEC overlooks some of the most important aspects of regulatory reform such as reforms of public administration, or the possibility of systematic adoption of tools to examine usefulness and efficiency of regulations (e.g. regulatory impact analysis). Part of the problem is that there is no clear definition of "deregulation" for IAPs. The deregulation component acts as a "catch-all" listing of various deregulation measures which are not listed in many other, better defined areas of IAPs (eg. customs procedures, technical standards and conformity, sectoral regulations) which have not been covered in this paper. Consequently, deregulation process in these economies can seem incoherent and haphazard, if only looked at through the IAP for deregulation. -
Patent Protection and Strategic Trade Policy
This paper reconsiders the well-worked topic of strategic trade policy, but we approach the topic from a novel and important perspective. We observe that previous work on strategic trade policy with regard to R&D subsidies, st..
Moonsung Kang Date 2000.10.30
Trade policyDownloadContentSummaryThis paper reconsiders the well-worked topic of strategic trade policy, but we approach the topic from a novel and important perspective. We observe that previous work on strategic trade policy with regard to R&D subsidies, starting with the seminal paper by Barbara Spencer and Jim Brander (1983), has proceeded under the implicit assumption that firms have perfect property rights to the results of their R&D investments. In reality, of course, the protection of intellectual property rights (IPRs) is not perfect. So it is natural to consider optimal choices for these policies in tandem rather than examining R&D subsidy policy in isolation.
We show that the level of IPR protection can have important implications for a government's incentives to intervene in the R&D decisions of domestic firms.We treat the level of IPR protection as exogenous, and consider how weak IPR protection may affect the case for an R&D subsidy in an international duopoly setting. When IPR protection is perfect, the model is identical to the original Spencer and Brander setup, and exhibits its well-known features. A firm's profits rise when its rival undertakes smaller amounts of R&D, and so governments seek to reduce the R&D levels of rival firms with their R&D policies. As a firm's best response to an increase in R&D by its rival is to reduce its own R&D (i.e., R&D reaction curves slope down), the domestic government will wish to subsidize R&D because, in providing the domestic firm with an incentive to do more R&D, the government is able to discourage R&D activity be the foreign rival firm.
However, in the presence of imperfect IPR protection, a novel force comes into play in determining government incentives to intervene in firm R&D choices: a rival's R&D now directly reduces one's own costs as well. If IPR protection is sufficiently weak, we show that R&D reaction functions will in fact slope up, so that a prediction of R&D subsidies will again obtain. But now it is fore precisely the opposite reason found in the original Spencer and Brander logic: the domestic government will wish to subsidize its firm's R&D in the presence of sufficiently weak IPR protection, because in providing the domestic firm with an incentive to do more R&D, the government is able to encourage R&D activity by the foreign rival firm, and the greater R&D investments of the foreign rival increase the profits of the domestic firm.This paper is useful in that it succeeds in identifying and characterizing the interesting effects that exogenous variation in the degree of IPR protection can have on standard strategic trade policy arguments. In pointing out the importance of the IPR regime for understanding the incentives to subsidize R&D, and even for predicting the sign of the optimal strategic R&D policy, we also set the stage of future research, which models the joint determination of R&D subsidies and IPR regime. -
The 3rd ASEM Summit: Providing a New Momentum to ASEM Process
The objective of the ASEM process is to build a new comprehensive partnership among equal partnership, based on the promotion of the three pillars of political dialogue, the deepening of economic relations and the reinforcement of..
Chong Wha Lee et al. Date 2000.10.16
Economic relations, Economic cooperationDownloadContent
SummaryThe objective of the ASEM process is to build a new comprehensive partnership among equal partnership, based on the promotion of the three pillars of political dialogue, the deepening of economic relations and the reinforcement of cultural links between East Asia and the EU. While overshadowed by the financial turmoil in East Asia at the second ASEM Summit in London in 1998, the third ASEM Summit in Seoul will have the task of setting out the key perspectives and priorities which Asia and Europe might address in the first decade of the new century.
With this in mind, this study aimed at evaluating the potential role and developing the desirable future path of ASEM in enhancing Asia-Europe partnership. In the political dialogues, ASEM efforts should focus on issues of common interest with a view to enhancing mutual awareness and understanding between partnership, particularly in areas where our views may differ such as 'human rights' and 'good governance'. Despite initial difficulties and confrontations, 3rd ASEM Summit is expected to forge a new equilibrium for political dialogue based upon mutual respect.
In the economic fields, ASEM efforts should focus on strengthening the economic partnership between the two regions, with a view to strengthening our economic and business relations, promoting infrastructural assistance to information networks, and contributing to open multilateral trading system
As for the future of ASEM process, there seem to be three broad scenarios: 'Status quo scenario', 'APEC type evolution scenario', and 'Hybrid scenario.' Under 'Status quo scenario', its agenda will be aimed primarily at facilitating information networks. Concerning the second, a more forward-looking strategy for ASEM would be aimed at achieving a goal where trade liberalization measures are matched with a non-binding regional investment initiative such as those in place in APEC. Under 'Hybrid scenario', ASEM can be used as a useful vehicle to facilitate information networks and to reinforce open multilateralism at the same time. A more plausible scenario for ASEM Ⅲ may well be somewhere in between the 'Status quo scenario' and 'Hybrid scenario'. However, in the longer term, the future of ASEM process will be somewhere in between the 'Hybrid scenario' and 'APEC type evolution scenario'.
In the cultural and intellectual field, ASEM should focus on promoting enhanced contact and strengthened mutual awareness between the people of the two regions, with a view to helping civil society in the two regions better appreciate. As regards education, the key priority should be to enhance our contacts and exchanges in the fields of education, including student and academic exchanges. -
Appropriate Exchange Rate Regime in Developing Countries: The Case of Korea
The choice of exchange rate regime in developing countries carries critical importance to their self-protection from speculative attacks and currency crises, as well as achievement of long-term economic growth. Deep integration of..
Chae-Shick Chung et al. Date 2000.10.15
Financial policy, Exchange rateDownloadContentSummaryThe choice of exchange rate regime in developing countries carries critical importance to their self-protection from speculative attacks and currency crises, as well as achievement of long-term economic growth. Deep integration of developing countries to the global economy makes it difficult to keep the intermediate regime between the two polar solutions. Shifting to more extreme choices between free floating and credible institutional arrangement (monetary union, currency board, or even dollarization) is recommended for many developing countries.
This paper examines the viability or appropriateness of two polar solutions, especially free-floating regime for developing countries. To do so, We investigate the Korean financial markets, which provide interesting case, utilizing multivariate GARCH and various VAR (Vector Auto-Regression) tools. We find that the slightest sign of either weakness of domestic economy or fragility of international financial markets might cause foreign investors to flock out of Korean financial markets and result in inviting another turmoil in Korea. In a limited sense, it is fair to say that the current transitory period from managed to flexible exchange rate regime is a very vulnerable period for Korean economy, and we need to be well equipped to another near international financial turmoil. -
The Seoul 2000 Summit: The Way Ahead for the Asia-Europe Partnership
1. ASEM has, in regularly bringing together East Asian countries and a consolidated group of European partners, contributed to the emergence of a new voice on the global scene, the voice of East Asia. This has important geo-strate..
Chong-Wha Lee edit. Date 2000.10.05
Economic cooperationDownloadContentSummary1. ASEM has, in regularly bringing together East Asian countries and a consolidated group of European partners, contributed to the emergence of a new voice on the global scene, the voice of East Asia. This has important geo-strategic implications as it will permit Asia's position to be strengthened through a partnership with Europe in accordance with a new model of equal partnership.
2. ASEM was not originally conceived as a bloc-to-bloc dialogue process, but it has taken on, more and more, an inter-regional character.
3. Hence, while ASEM should by nature be open to Asia as a whole, and Europe might in future be enlarged, there might be some value in consolidating ASEM first as a Western Europe-East Asia forum, at least for the time being. Nevertheless, ASEM could consider opening further dialogue avenues with countries which might become partners in the future.
4. ASEM should remain an informal process where no decisions have to be taken, nor treaties negotiated. It can be a useful forum to build consensus between East Asia and Western Europe on political dialogues and global issues such as the New Trade Round, international financial architecture, drug trafficking, money laundering, and the environment.
5. Non-institutionalisation in the form of a loose and informal process does not necessarily mean an absence of organisation. The function of a lean and effective secretariat along the lines suggested in the Asia-Europe Vision Group's report, in addition to existing political co-ordination mechanisms, might not be inconsistent with the principles of adding value and avoiding duplication of initiatives. Initiatives such as the ASEM Trust Fund or ASEM Educational Hubs should be given due recognition, and it can be seen that through this loose and informal process, Track I may give birth to various institutions and build infrastructure to promote exchanges between Europe and Asia.
6. A common agenda is not given, but must be built through a continuous effort. Issues such as the challenges of globalisation, the necessity of state and corporate reform, human rights, good governance, and the role of civil society should be discussed. An annual ASEM Roundtable on Globalisation was proposed as a useful vehicle to promote such discussion.
7. Parliamentarians, the media, and NGOs should be more actively associated with the ASEM process, whether through Asia-Europe Foundation (ASEF) or other initiatives. The role of the ASEF should generally be fully acknowledged at ASEM III, and its mandate should be renewed, backed by the necessary financial commitment.
8. In the economic sphere, ASEM does not yet have any binding obligations. However, it is evolving through peer pressure and discussions on trade and investment liberalization help to build an Asian-European consensus in support of free trade and open economies, as well as international cooperation and globalisation with a human face.
9. Political issues should not be conceptualised too narrowly. Despite initial difficulties and confrontations, it is hoped that ASEM III will forge a new equilibrium for political dialogue based upon mutual respect.