In this study we consider five scenarios for Korean unification: 1) military unification, 2) regime collapse, 3) maintaining the status quo, 4) reconciliation and cooperation, and 5) the optimal scenario of inter-Korean relations, peaceful unification. Comparing these five scenarios with the existing unification scenarios, we can observe shortcomings of past reunification scenarios. First, unification would be achieved under the guidance of South Korea on the basis of the market economy and liberal democracy as the political system. Second, they ignore the positions and interests held by North Korea. Third, they put excessive emphases on economic benefits of Korean unification to neighboring countries. Lastly, they predicted that unification would actually be achieved in near future. This study attempts to correct the shortcomings of previous reunification scenarios and to reflect current realities. Cost-Benefits of each of the five unification scenarios are as follows.
A military unification scenario could be initiated only by the U.S.A or with their approval and support by the ROK. NK does not have the armaments, logistical and human resources to resist after a recent chain of natural disasters, on top of economic problems and being subject to severe international sanctions. The costs of this scenario to Russia would be possible damage to the Russian Far East territory and citizens; tighter security and border control leading to a slowdown in the implementation of development projects in the Russian Far East; possible sanctions from the West; suspension of multilateral projects in Northeast Asia; and the decline in trade and other forms of economic cooperation between Russia and both Koreas. Russia also stands to lose 0.5-1.5 billion USD in transit earnings annually from delays in the railroad project, and additional 3.0 billion USD related to the interruption of the gas project. There will be no benefits for Russia in a military unification scenario.
Regime collapse scenario is unlikely because of the firmness of the NK leadership on key domestic and foreign policy issues, and support from China, which provides food and other necessities to maintain social stability in NK. Russia’s costs under this scenario will be the same as in the case of military unification minus the direct damage to the Russian Far East territory and population. Possible benefits to Russia will be in the indefinite future, mostly from possible elimination of obstacles for implementation of rail, gas and other projects.
The status quo scenario is one of the more probable options. The main danger of the scenario is the unpredictability of NK’s response to the US and its allies’ disregard for Pyongyang’s security concerns. Russia’s costs would include simple continuation of the existing economic relations with both Koreas; postponement of benefits from the geographical location of the peninsula as a “bridge of integration” in East Asia; delays in implementation of the railway, gas and other projects (the same as in previous two scenarios). Russia’s benefits will include maintenance of some stability on the peninsula; savings in defense spending; gradual increase in trade volume and economic cooperation with the two Koreas. By 2020, Russia’s bilateral trade with SK is expected to reach 30 billion USD, with the NK – 1 billion USD.
Reconciliation and cooperation represents a far more profitable scenario since it significantly reduces the risk of large-scale armed conflict on Russia’s borders and increases chances for the realization of multilateral economic projects. Russia’s costs will be related to funds needed for the implementation of those projects, establishment of effective mechanism of trilateral cooperation (Russian Far East-SK-NK) and for assistance to modernize the NK economy. Russia’s benefits may include revenues from the realization of railway and gas projects (up to 5.0 billion USD annually): acquiring a key position in facilitating trade flows from Europe to the Korean Peninsula and back; increases in her trade with SK and NK; more active participation of the two Korean states in economic projects in the Russian Far East region.
The optimal scenario of peaceful inter-Korean relations is a prerequisite for the start of the reunification process, which would meet the interests of both the Korean nation and the international community. Russia’s benefits will stem from creation of a larger market for the export of her energy resources; connection of TSR with TKR; exploitation of gas and electricity transmission lines; increased investment in the Russian Far East, including the development of advanced growth zones; transformation of the peninsula into a transit bridge for Russia’s integration into the APR economy. In general, the implementation of this scenario would bring additional 2-3% increase in the Russian GDP annually. Since this scenario is unlikely to be realized, the most profitable and realistic prospect for Russia remains the development of peaceful relations between SK and NK according to the “Reconciliation and Cooperation” scenario.
Any real progress towards a ultimate goal of Korean reunification can be achieved only when the NK elite will be convinced that the SK, along with the international community, engage in an honest attempt to integrate the North into the existing world.

It has been 10 years passed since the first Korea-Chile FTA went into effect. A bilateral FTA has become more widespread, due to lack of progress in WTO DDA negotiations since the 2000s. Korea, being a country highly dependent on trade, has switched the direction of trade policy from multilateralism towards bilateralism in order to respond to changes in the commercial environment.
In this study, we analyzed Korea’s FTAs policy based on the outcome of recent bilateral FTAs from the perspective of achievement of policy objectives. This study focused more on areas where evaluation of the effectuated FTAs was possible, to enable differentiated and in-depth contribution from previous studies. This evaluation has been made in two categories: internal and external issues. The following issues were assessed in connection with internal issues; FTA network, the products, service and investment in bilateral trade; and the assessment of external issues included economic growth, consumer welfare, distribution structure over industry and business scale, and changes in domestic policy.
Korea has consistently pursued its FTA policy based on the FTA roadmap of 2003 that encompassed FTA promotion strategies, selection standards for FTA partners as well as its order of priority. It ultimately emphasizes three strategic principles for FTAs: first, multiple simultaneous approach; second, comprehensive and high-quality coverage; and public consensus-based procedures.
By evaluating the result of a decade of effectuated FTAs, Korea has successfully established a comprehensive and high-quality, multi-FTA network. Starting with the first Korea-Chile FTA in 2004, as of 2014 Korea has effectuated nine FTAs with 46 partners including the US, EU and ASEAN, and concluded three. In the meantime, the number of bilateral FTAs in the East Asian region has gradually increased to 71 FTAs in comparison with 58 FTAs a decade ago. According to Social Network Analysis, the degree to which Korea is connection-centered (the number of FTAs) and betweenness-centered (linkage between nations) was the second highest among East Asian countries after Japan. Nevertheless, Korea preferred to be economic partners with more comprehensive and advanced economies such as the EU.
As for the change in trade volume through bilateral FTAs with Chile and ASEAN, Korea has greater market shares, especially in favorable industries since the FTAs went into effect. However, a first mover advantage was lost due to bilateral FTAs between major competing nations and Chile/ASEAN. In the case of FTAs with the US and EU, although Korea achieved some increases in market share immediately after the effectuation of FTAs, the economic effect of FTAs was smaller than expected because of delays in economic recovery in these countries caused by the global financial crisis. In this context, this study contains a regression analysis using a gravity model, with the amount of imports as dependent variables and each FTA as key explanatory variables. As a result, the concluded FTA has a positive effect on the growth in trade between trading partners.
The number of export items in terms of FTA trading partners has grown by 6.1%p and 1.3%p in Chile and the US respectively, as the diversity of export items has improved. By measuring the concentration of import items, the import concentration is expected to lead to an increase in consumer welfare from improvements in diversity and competitive structural change, but export intensity actually deepened in some countries as to require 'discovery' of various export items. The FTA resulted in positive effects both on the number of export and import items by industrial analysis, whereas the impact on the value of imports and exports has suggested the need for industry-specific measures tailored to the different industries.
Services trade effect due to the FTA has mainly occurred in transportation, telecommunications, insurance, computer services and trade-related businesses. After the effectuation of the FTA, FDI from the US, EU, ASEAN and others has increased but there was no evidence of increased FDI to the FTA partners. Only FDI in manufacturing and service sectors to the US, EU, ASEAN has slightly increased. However, a questionnaire survey of enterprises operating in ASEAN and Central Europe showed that the effect of FTA was very limited since they generally consider variety factors such as market scale and production cost when investing overseas.
While previous studies mainly focused on the impacts of trade within bilateral FTAs, this study will analyze the overall economic impacts of FTAs in terms of growth and welfare as changes in bilateral trade may affect world trading and the overall economy in a variety of ways. Regarding growth effect of FTAs, the results for EU was the highest with 0.9%; growth of 0.43% and 0.11% were seen in ASEAN and Chile respectively. In addition, by comparing the overall growth effect from FTAs to the total economic growth in 2013, the growth effect of FTA accounted for 1.19% of the 3% total economic growth in Korea. It means that an FTA can be considered as having a significant supporting role in Korea's economic growth.
Regarding the result of business performance, the number of domestic export enterprises has increased continuously from 2007 until 2012; the growth rates in numbers of both large and small/medium-sized enterprises increased faster with FTA partners. Despite the fact that most enterprises were inevitably subject to market openness in the time of the launch of the FTA, some enterprises could recover prior profit rates through export; however, domestic companies are likely to experience difficulties due to decreased average profit rates.
The Korean government proposed institutional advancement as one of its important policy measures while promoting additional FTAs with advanced economies. In this study, the amendments into national law instruments based on KORUS FTA were organized and evaluated in terms of their institutional linkages by 6 different categories: ‘regulatory harmonization’ (4 cases), ‘institutional streamlining’ (3 cases), ‘transparency’ (3 cases), ‘value-added services market access’ (5 cases), ‘strengthening the level of protection in intellectual property rights’ (9 cases) and ‘system of transparency’ (1 case). These institutional changes shall ultimately promote competition through trade and investment in order to improve industrial competitiveness, and continue to be monitored as to whether the link is functioning properly.

 This study estimates the effect of economic integration between South and North Korea for the Six-Party Talk members including the U.S., China, Japan, and Russia by way of Recursive Dynamic Computable General Equilibrium model.
This study predicts four types of changes from the integration, and utilizes previous studies to estimate the volume of the changes. First, it predicts the change in production factors such as labor, capital, land, and natural resources from the integration. Second, the unification, along with the TPP, would expand the market size. Third, it considers improved finances from reduction of military expense and subsidies from the South to the North. Last, it expects that South-North integration would lead to relaxation of tensions in Northeast Asia and enhancement of trust at the international level, which would affect the Six-Party Talk members positively.
This study considers the following two scenarios: one involving efforts undertaken solely by the South and North, and the other with added effort from the Six-Party Talk members. Additionally this study estimates the minimum and maximum from the four changes and creates detailed scenarios. Those scenarios were applied to the Recurve Dynamic Models, and the economic effects were estimated. According to the estimations, South Korea’s GDP would rise about 1.7~3 percent and North Korea’s GDP would rise about 4.3~110.6 percent solely as a result of the economic integration between the two Koreas. Moreover, the U.S. and Japan’s GDP would rise due to the integration and the TPP, and possibly in some sense China and Russia may experience positive effects as well. In particular, it is predicted that Japan would be the leading beneficiary among the members.  
This study suggests the following implications. First, previous studies estimate the effects in fragmented fashion and thus overlook the fact that each economic agent who is confronted with the changes may lead the new equilibrium. This may result in overestimation of the benefits from the integration. Second, economic growth in North Korea would bring forth considerable benefits to Japan. Third, we may have to pursue a coordinated unification policy in that abrupt economic growth of the North Korea may actually have negative effects on other countries.

According to the “Unification Bonanza” initiative by President Park in early 2014, expectations towards unification are rising alongside the realization that unification requires preparation. Discussions that focus on the benefits of unification may be desirable for eliciting passion for unification and seeking better strategies. However, the problem is with creating arguments for overall comprehension of costs and benefits. Recent trends tend to stress economic costs and benefits of unification too radically. Unification not only represents the emergence of a large-scale community which is a unified Korea, but will also mean fundamental shifts in the geopolitical configuration of Northeast Asia (hereafter NEA).  For this reason, the costs and benefits in terms of international politics must be reviewed in detail. This study seeks to move beyond discussions that center on economic costs and benefits, and instead considers political, social, and diplomatic costs and benefits. By doing so, we emphasize not only the benefits for a unified Korea, but also benefits to the NEA and the world.
While discussions on the benefits, in terms of international relations, maintain the view that Korea will reap huge gains in national power and standing, another line of argument also suggests that a strong unified Korea may benefit the NEA and the international community as well. Hence, now is the time to suggest that neighboring countries and international society can all share in the benefits of Korean unification.
In this respect, the present government’s diverse strategies are achieving meaningful results. The principle of inter-Korean relations is known as the ‘Trust-Building Process on the Korean Peninsula’, which consists of 9 major topics including DMZ World Peace Park and Eurasia Initiative Strategy. Regarding unification, the Korean government has declared the ‘Dresden Manifesto’. In addition to this, NEA Peace and Cooperation Initiative is suggested as a regional policy for NEA and there are also efforts to provide a structure for multilateral cooperation in the NEA region.
Based on diplomacy and security benefit analysis of unification for each country and region, the Korean diplomatic policy for unification must consider the following. Firstly, in the context of unification diplomacy, NEA peace cooperation as part of President Park’s regional strategy must be more subtle and intricate. We must clearly demonstrate to neighboring countries that a unified Korean Peninsula will decrease regional security risks, and may well contribute to creating a new security governance regime that replaces the current unstable structure. In line with the US rebalancing strategy, Chinese expectations, and the Japanese normalization strategy, the national security strategy of the South Korean government must be compelled to expand its limited scope regarding South-North Korean relations. Even when devising inter-Korean relations and policies vis-à-vis North Korea, we ought to include a broad basis for a new NEA architecture, for which it is most urgent to formulate better policies vis-à-vis NEA and suggest more effective ways for unification of the Korean Peninsula.
Second, alongside unification diplomacy at the NEA level, we must not neglect bilateral unification diplomacy. In fact, the benefit calculations that neighboring states conducted regarding the emergence of a unified Korea differ from one other and are sometimes even contradictory. Seeing that the US and China intensify their competition for leadership in East Asia, and that Japan and Russia are increasing involvement in great power politics, South Korea ought to conduct earnest benefit calculations and elicit shrewd measures in response, based on realistic considerations. Furthermore, it also must clarify which strategy unified Korea could make in connection with great power politics in the context of the current power balance, and in forming a multilateral cooperation system
Thirdly, we require a more advanced unification plan, whereby the new plan must correspond to changes in the external environment for unification. For achieving this, the diplomatic policy for the unification of the Korean Peninsula should think past the creation of one nation- state via the re-unification of the two Koreas, but instead should hold up the vision of establishing an exemplary political community in East Asia. From the perspective of building a networked community that exceeds territorial nation-states of modern history, this may contribute to generating a new and future-oriented view of states.

   This paper examines the determinants of portfolio capital flows of both advanced and emerging markets and aims to obtain better understanding of detailed characteristics and patterns of cross-country capital flows. We investigated separate effects of push and pull factors in cross-country capital flows of both debt and equity markets. There is also an analysis of the effects of changes in monetary policy stance and capital market volatility on both international investments in equity and debt securities. In addition to macro analysis of international capital flows, we also expand the scope of our analysis to micro-level data and derive comprehensive implications, which do not appear frequently in current literature.
Our results suggest push factors such as global capital market volatility had significant effect on net equity capital flows in emerging markets, whereas pull factors such as financial market developments had significant effect on net debt capital flows. We also found that significant determinants of capital flows to advanced market were different from flows to emerging markets. Moreover, there were a number of factors whose effects displayed significant changes since the global financial crisis, reflecting changes in the international capital market environment. The negative effect of global capital market volatility on the net flows to emerging equity market stayed at about the same level before and after the crisis, however the effects of some of the pull factors such as financial market development on the portfolio capital flows increased considerably, especially on the flows to debt markets.
Our analysis of the effects of monetary policy changes on the portfolio capital flow suggests that the increase in real short term interest rates does not significantly decrease the capital flows to both equity and debt markets in emerging economies. The seemingly insignificant response of emerging capital markets to the increase in real interest rates has to be interpreted with caution, however. The short-term real interest rates may not truly reflect the changes in monetary policy because the transmission channel of the short term interest rate is very wide and complex. Therefore there is a risk that the increase in real interest rates alone may not capture all the effects of monetary policy. On the contrary, a rise in global capital market volatility actually increased the net flow to equity markets of advanced economies and decreased the flows to emerging markets.
Lastly, we examined the effects of investor base concentration on the international capital flows. We found that higher investor base concentration was associated with higher volatility of capital flows and that high participation rate of hedge funds had positive association with high capital flow volatility. When we divided the entire sample into advanced and emerging markets, we found positive and significant effect of investor base concentration on capital flow volatility in emerging markets. On the contrary, we did not find similar results in advanced economies. In our analysis, the sample period was divided into periods before and after the global financial crisis. We thus confirmed that there was a similar level of importance of the investor base concentration for capital flow volatility. Moreover, we found considerably more capital had flowed into countries with high investor base concentration after the crisis.
Summarizing our findings above, there are several interesting implications for international capital flows. First, country fundamentals are very important determinants of overall international capital flows, despite there being some parts of the capital market with greater susceptibility to shocks from global factors. Therefore, it is suggested that policy makers in emerging economies may benefit from improving fundamentals and from differentiating one’s economy from other emerging economies, although it is still important to build strategies in response to changes in global factors.
Secondly, in the likely scenario of policy rate hike during the course of normalization of super easy monetary policy, capital outflow is likely to take place in advanced economies rather than emerging ones. Since this conclusion is drawn from the analysis of international capital allocations by U.S. investors only, the conclusion is a limited one in that we do not have complete data for investors from other advanced economies. It is also possible that the insignificant reaction in emerging market portfolio capital flows could be due to varied level of responses within emerging countries, as we saw in connection with the first implication stated by our paper. In the scenario with increased global capital market volatility, our result suggests capital will flow into equity markets of advanced economies and flow out of equity markets of emerging economies. If the rate hike is accompanied with increases in volatility, we expect to see capital out flows from debt markets of advanced economies and equity markets of emerging economies.
Finally, we found that capital flow was concentrated in countries with higher potential for volatile capital flows. Therefore, caution is warranted in those countries. After the global financial crisis, we saw large increase of capital flow towards emerging economies whose investor base was concentrated. Recalling that a higher concentration of investor base was associated with higher capital flow volatility, we can deduce that the countries with concentrated investor base can exhibit rapid reversal of capital flows in the even of increased global volatility.

Korea announced that it had reached a bilateral free trade agreement (FTA) with China in November 2014. This agreement signifies the strong interest of the Korean government and companies in entering the domestic market of China, including its cultural sectors.
This study considers cultural industries as an important sector in the cooperation between Korea and China. A comparative analysis was conducted on the development of local cultural industries of China in three environments: industry, market, and policy. Based on the results from the comparative analysis, the study provides suggestions for furthering Korea–China cooperation in the cultural sectors.
The primary findings of this study can be summarized as follows: In Chapter 2, we analyze the overall environment of the Chinese cultural sectors. The cultural industries of China have maintained a steady growth of 20% CAGR over 10 years since 2004; its cultural market was the third-largest in the world in 2012. The Chinese government has fostered its cultural industries since the beginning of the 10th Five-Year Plan period (2001–2005) to strengthen the competitiveness of these industries in preparation for joining the World Trade Organization in 2001. Korea–China cooperation in the cultural sectors has been active, particularly in the export of online games and co-production of films and animation. Trade and investment are expected to further increase once the Korea–China FTA is signed and various entry barriers are eliminated.
In addition, we compare the current situation of the Chinese cultural sectors by region and suggest regional groups in the cultural sectors. Beijing, Shanghai, and Zhejiang comprise the first-tier group, having well-endowed industry, market, and policy environments. The second-tier group includes locations in the east coast with relatively better infrastructure, such as Jiangsu, Fujian, and Guangdong Provinces. Tianjin and Guizhou are noted for their similarities in display of strong willingness to provide policy support for cultural industries.
In Chapter 3, we compare the regional environments by sub-sectors. In the broadcasting sector, Beijing, Shanghai, Zhejiang, and Shandong as well as Hunan, Sichuan, and Shaanxi are selected as ideal locations because these regions possess the requisite environments in industry, market, and policy for development of the broadcasting sector. In the film sector, Beijing, Shanghai, and Zhejiang are the major regions. While three locations all have excellent environments, most resources are concentrated in Beijing, which implies that development of the Chinese film sector will be centered on Beijing for the foreseeable future. In the online game sector, the availability of communication infrastructure greatly affects development in the sector. Thus, industry and market are developed mainly in Beijing, Shanghai, and Guangdong where the communication infrastructure is well-established. In the animation sector, Shanghai represents the best location in terms of industry, market, and policy environments together, followed by Beijing, Jiangsu, Zhejiang, Hunan, Guangdong, and Fujian.
In Chapter 4, we propose a cooperative direction and cooperation strategies in detail by region-sector matching, on the basis of previous analytical results and suggest four groups for 31 provinces/municipal cities, namely, first-, second-, third, and fourth-tier groups. The first-tier group (i.e., Beijing and Shanghai) has cultural sectors with an excellent infrastructure and competitive sub-sectors, such as broadcasting, film, online game, and animation. The second-tier group (i.e., Fujian and Sichuan) has a small number of competitive sub-sectors; at the same time, the local governments are active in fostering cultural industries. The third-tier group (i.e., Henan and Tianjin) requires a medium-term approach compared with the previous two groups. Finally, the fourth-tier group (i.e., Jilin and Neimenggu) requires a long-term approach through continuous monitoring.
In addition, we argue that the characteristics of each sub-sector should be carefully considered for the local-level cooperation in cultural sectors. In the film and online game sectors, a small number of major players are dominating the market or industry of the country. In such situation, regional grouping is not very useful. Strengthening cooperation with major regions, such as Beijing and Shanghai, seems to be a better strategy. In contrast, in the broadcasting and animation sectors, the development of industry or market is partly determined by the support from the local government or relevant companies. Therefore, facilitating cooperation with a number of regions is recommended for the broadcasting and animation sectors.
Finally, we propose that collaboration in the cultural sector between Korea and China should thoroughly examine the locational context involving industry, market, and policy environments. Depending upon the level of strength of industry, market, and policy environment, a customized strategy can be formulated in a manner to induce maximum benefits from the local environment. On the basis of the preceding analytical results, we suggest the cooperation strategy of the general cultural sector (Shanghai and Henan), broadcasting sector (Beijing, Zhejiang, Shandong, and Sichuan), film sector (Beijing and Zhejiang), online game sector (Sichuan), and animation sector (Guangdong and Hubei).
In Chapter 5, we discuss the strategies for the Korean government and companies to expand cooperation with China in the cultural sectors. First, regarding cultural services, the Korean government should adopt a gradual approach in the course of post-FTA negotiations with China. In other words, the Korean government can utilize the reservations list similar to that in the Korea–U.S. FTA for future liberalization in the cultural services, include the “Protocol on Cultural Cooperation” in the FTA, and discuss the opening of the online game sector with the Chinese government. Moreover, the Korean government should build a foundation for cooperation with China, enhance support for Korean companies entering the Chinese market, and improve the existing system related to the cultural industry.
With regard to the Korean companies, we suggest that they should strengthen their planning capability and creativity, diversify business partners and products, and carve out a niche market. In addition, localization (i.e., establishing a subsidiary or an R&D center in China) can be adopted as a long-term strategy.

After Vladimir Putin won the 2012 Russian presidential elections, one of his first Presidential decrees involved creation of a ‘strong Russia’. In particular, the post-Soviet space has been given renewed focused, because the world powers including Russia have tried to reorganise their power relationship in and around this region. The post-Soviet sphere has become an area for strategic competition where pro-Russian regional groups and anti-Russian or pro-European multilateral organisations co-exist.
In 2014, the Russian government adopted three goals in connection with its foreign policy, and one of goals is to strengthen regional integration in the Eurasian Continent, efforts for which is to be led by Russia. In this sense, the Eurasian Economic Union (EEU) which came into existence officially on January 1 2015 has implications as Russia’s ambitious regional integration project for the CIS area.
From these perspectives, this research has three goals: the first goal is to examine the economic significance of EEU in terms of spatial reorganisation of the global economy; the second is to analyse EEU’s political impact from the perspective of Russia’s international strategy; and the third goal is to examine the response or policies of relevant countries (world powers such as US, EU and China and countries in the CIS area) regarding the EEU. This research eventually leads to providing implications and policy directions for the Korean government’s Eurasia Initiative.
The second chapter of this research covers the background and current situations related to regional structural changes in the global economy, which also serves as the theoretical background for this research. The next chapter analyses Russia’s international strategy and EEU’s expansion policy. The analysis in this chapter shows Putin’s ambition to build up strong regional power groups. The fourth chapter examines strategies and policies towards EEU of major global powers such as the US, the EU and China, each of which has different policies and/or strategies depending on its economic and/or political relations with Russia and countries in Central Asia. The fifth chapter demonstrates how various countries in post-Soviet sphere set up their strategies and/or policies towards EEU, in particular, focusing on whether countries in this region joined the EEU; Kazakhstan and Belarus as members of Customs Union which automatically become the member of the EEU.
This research will contribute to a better understanding of the internal dynamics and future perspectives of Eurasian regional integration, spatial changes connected to international relations in the post-Soviet space, and energy-related relations from the beginning of EEU. In addition, this research could lay a foundation for the Korean government in setting up mid-to-long-term strategies towards the EEU.