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Chapter 1 Multilateral & Regional Economic Diplomacy 240 Chapter 2 Energy & Resources Cooperation and Green Growth & Environmental Diplomacy 257

04 Reinforcement of Economic

Cooperation Capacity

2016Diplomatic White Paper

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2016 DIPLOMATIC WHITE PAPER

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Economic Cooperation Capacity Chapter 1 Multilateral & Regional Economic Diplomacy

Multilateral & Regional Economic Diplomacy

Chapter 1 1. 2015 Antalya G20 Summit

The tenth G20 Summit was held in Antalya, Turkey on November 15-16, 2015.

At the summit, G20 leaders shared the view that global recovery remained slow and unbalanced and that financial market uncertainty continued. Based on such common understanding, the leaders discussed ways to establish firm and inclusive growth and create substantial employment opportunities.

Taking into account the three priorities of the summit: ⅰ) Enhancing Resilience,

ⅱ) Strengthening the Global Recovery and Lifting the Potential, and ⅲ) Buttressing Sustainability, the leaders discussed ways to strengthen policy coordination in such areas as investment, employment, trade, finance, tax, development, energy, and climate change. As a result of the in-depth discussions, the G20 Leaders' Communique and its twenty-two agreed documents were adopted. In addition, considering the serious threat of terrorism, the leaders also adopted the G20

Statement on the Fight Against Terrorism to demonstrate the G20's will to combat terrorism.

During the summit, G20 leaders agreed to carry out macro policies based on careful coordination and clear communication with the objective of minimizing the volatility of the world economy and its negative ripple effect. In addition, the outcomes of growth strategies of each member country, which were submitted at the previous Brisbane G20 Summit in 2014, were evaluated. Investment strategies to overcome low economic growth were also established as well as plans to achieve the goal of reducing the share of younger generations who possess the highest risk of being permanently left behind in the labor market by 15% by 2025.

G20 leaders stressed that COP21 should be successfully held in Paris in December to establish a new climate change system and endorsed a package of measures under the Base Erosion and Profit Shifting (BEPS) project to respond in a collective manner to the offshore tax evasion of multinational companies. In particular, as the Syrian refugee crisis and the threat of terrorism were becoming more serious, examples of which are the grave terror attacks in Ankara, Turkey on October 10 and in Paris on November 13 just before the Summit took place, G20 leaders encouraged all countries to share the burden in assisting refugees and demonstrated their strong will to combat terrorism.

Regarding the Development Agenda, which had been strengthened since it was first introduced at the 2010 Seoul G20 Summit, there was consensus to establish a collective action plan in 2016 to follow-up on the 2030 Development Agenda, and G20 leaders also agreed to exert efforts to expand energy access in the Sub-Saharan African region, which suffers from a serious energy shortage.

Korea obtained good results in implementing the Growth Strategy, which had been submitted at the 2014 Brisbane Summit, by faithfully carrying out its

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Economic Cooperation Capacity

commitments. In addition, Korea showed outstanding leadership in bridging the gap among developed and developing countries. President Park Geun-hye emphasized the need for structural reform to overcome low growth and shared Korea's experience in creative economy and structural reform. In addition, President Park suggested careful and gradual coordination on the monetary policies of developed countries and emphasized the Korean government's will to faithfully implement the automatic exchange of information (AEOI) and to effectively respond to base erosion and profit shifting (BEPS).

With regard to the issue of climate change, President Park shared exemplary cases of Korea's new energy industries, emphasizing that countries should seize the opportunity to create new growth engines by appropriately responding to climate change. President Park stressed the need to support developing countries through the Green Climate Fund (GCF). She also held bilateral meetings with UK Prime Minister David Cameron and India's Prime Minister Narendra Modi on the occasion of the G20 Summit.

Since the first G20 Summit was held in 2008 to deal with the financial crisis following the bankruptcy of Lehman Brothers, leaders of twenty countries had already gathered on ten different occasions before the Antalya Summit. As a premier forum for international economic cooperation, the G20 Summit has served as an excellent venue to discuss major global economic issues. In particular, taking into account that terrorism and refugee issues were discussed at the Antalya Summit, it is hoped that other global issues, in addition to financial and economic issues, would continue to remain on the G20 agenda for international cooperation.

The Korean government vowed to continue its efforts to enhance Korea's status on the global fora by actively participating in the G20 Summit and taking the lead in discussing key agenda items. Such efforts would contribute not only to creating

a stable global economic environment but also to laying the foundation for the sustainable growth of Korea.

2. 2015 APEC Economic Leaders' Meeting (AELM)

The 23^rd APEC Economic Leaders' Meeting (AELM) was held in Manila, the Philippines on November 18-19, 2015 and was joined by 21 economic leaders from the Asia-Pacific region including President Park Geun-hye. At the AELM, the economic leaders discussed agenda items such as "Inclusive Growth through Integrated Economies" and "Inclusive Growth through Sustainable and Resilient Community" under the overarching theme of "Building Inclusive Economies, Building a Better World." APEC economic leaders also met with regional business leaders at the Dialogue with APEC Business Advisory Council and discussed various regional economic issues. Furthermore, following the suggestion of the Philippines, the host country, APEC economic leaders participated in an unofficial dialogue with the leaders of Pacific Alliance, to which Mexico, Peru, and Chile belong. They discussed ways in which both regional bodies could better cooperate.

Upon these discussions, APEC economic leaders adopted the 23^rd APEC Leaders' Declaration, which comprised of 53 articles and two annexes: the APEC Strategy for Strengthening Quality Growth and the APEC Service Cooperation Framework. They also adopted the Statement on Supporting the Multilateral Trading System.

The UN adopted the 2030 Agenda for Sustainable Development in 2015, and the 23^rd AELM served as a good opportunity for APEC economic leaders to discuss APEC's contribution to the inclusive growth of the Asia-Pacific in terms of policy directions and specific measures adding on to APEC's long-term dedication

Chapter 1 Multilateral & Regional Economic Diplomacy

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to regional trade and investment liberalization as well as regional economic integration. President Park emphasized that APEC should seek ways to strengthen the competitiveness of service industries and accelerate the internationalization of MSMEs. She also described Korea's efforts towards regulatory reform in seven major service industries and proposed the launch of an APEC project for a collaborative analysis on regional regulatory environments in the service sector. Many APEC economic leaders concurred with President Park's emphasis that, without proper regulatory reform in the service sector, innovation could not be achieved.

Furthermore, President Park, stressing that inclusive growth could only be achieved with the internationalization of MSMEs, proposed policy measures such as supporting the integration of MSMEs into the global value chain, building a collaborative partnership between MSMEs and large companies, and designating an authorized economic operator (AEO) for the facilitation of customs procedures.

As a result of such discussions, APEC economic leaders adopted the APEC Service Cooperation Framework, which reaffirmed the importance of the development of the service industry for regional economic growth and presented the basic principles for regional service cooperation including transparency, strengthened cooperation, and capacity building for developing economies under the overarching objective of trade and investment liberalization. In particular, APEC economic leaders agreed to develop an APEC Service Competitiveness Roadmap in 2016, which would incorporate the specific goals for 2025. Meanwhile, APEC leaders also endorsed the Boracay Action Agenda to Globalize MSMEs, which was suggested by APEC trade ministers.

APEC economic leaders also discussed the agenda item of "Inclusive Growth through Sustainable and Resilient Community" and shared their domestic best practices and policy measures for achieving inclusive communities. President

Park emphasized the need to reform the labor market and promote the economic participation of youth and women and shared Korea's policy experience in this regard. President Park also introduced Korea's experience in supporting start-up businesses through the Center for Creative Economy and Innovation (CCEI) and pointed out that the Asia-Pacific region needs more policy measures that could boost entrepreneurship. President Park also highlighted that, in order to achieve inclusive growth, policy efforts to help rural communities contribute to economic growth should be intensified. In line with this, President Park explained that international organizations such as the OECD and UNDP are developing a new rural development paradigm for the 21^st century based on Korea's rural development experience, the New Village Movement (Saemaul Undong).

At the Dialogue with APEC Business Advisory Council, President Park emphasized the importance of service industries for economic growth and job creation, the necessity to implement regulatory reform for the development of the service sector, and the necessity to address climate change issues with the utilization of technologies and development of new businesses.

Finally, President Park expressed her wish to host the AELM in Korea in 2025.

Other leaders welcomed Korea's suggestion, and it was decided that Korea would host the AELM in 2025. Korea would be hosting the AELM for the second time in 20 years following the 2005 AELM in Busan. It would help Korea play a key role in accelerating the liberalization of trade and investment and advancing regional economic integration. The Korean government pledged to continue its active participation in APEC, which would in turn be conducive to securing new growth engines for the Korean economy.

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The Organization for Economic Cooperation and Development (OECD), an intergovernmental organization established in 1961 with the goal of enhancing global economic growth and stability, has worked for economic growth and the expansion of trade through policy coordination and cooperation among member countries. Since its accession to the OECD in 1996, Korea has actively participated in its work. In 2015, it continued its contribution to the Organization by participating in the 2015 OECD Ministerial Council Meeting and the third meeting of the OECD Global Strategy Group.

The Ministerial Council Meeting, the highest decision-making body of the OECD, was held in Paris on June 3-4 2015 under the theme of Unlocking Investment for Sustainable Growth and Jobs. The Korean delegation, which was headed by Deputy Prime Minister Choi Kyung-hwan, enriched the discussions at the meeting by presenting the Korean government's policies with regard to economic innovation, climate change and green growth, and liberalization of trade and investment. It expressed Korea's will to participate in international discussions and to cooperate with the OECD.

During a high-level panel discussion held under the theme of "Structural Reforms to Promote investment," Deputy Prime Minister Choi Kyung-hwan urged member countries to foster mutual understanding of the current economic situation and called on the OECD to suggest solutions for an orderly normalization of quantitative easing. Deputy Prime Minister Choi chaired the Investment Session by a breakout group and introduced the Korean government's efforts to raise investment such as its regulatory reforms and programs to boost business investment and introduced the creative economy initiative that Korea has been pursuing to find new growth

strategies.

During the Development Session, Vice Minister of Foreign Affairs Cho Tae-yul suggested that the OECD play a role in implementing the Post-2015 Development Agenda, which drew agreement among many member countries, and expressed Korea's will to actively cooperate with the OECD to achieve two goals: 1) national implementation of the Post-2015 Development Agenda and 2) development in underdeveloped countries. In addition, in the Low-Carbon Economy Session, he introduced the Korean government's policies for the transition to a low-carbon economy such as its Five-year Plan for Green Growth and nationwide emissions trading system and put emphasis on the importance and role of the Green Climate Fund under the new international climate system.

Vice Minister of Trade, Industry and Energy Moon Jae-do introduced the Korean government's efforts to improve payment, customs clearance, and distribution in the e-commerce system and highlighted the need for adequate protection of personal information as well as cross-border information exchange to promote e-commerce.

Korea's G20 Sherpa Lee Hye-min attended the third meeting of the OECD Global Strategy Group, which was held in Paris on December 1-2, 2015 and actively participated in the discussions on the role of the OECD in a changing international environment, global economic cooperation in trade and investment, and the OECD's contribution to the Development Agenda.

Korea vowed to continue to strengthen its role as a middle power by utilizing the discussions in the OECD to advance its own institutions and policies and by supporting the efficiency of the activities and management of the OECD as a global policy network.

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The UN Economic and Social Commission for Asia and the Pacific (UNESCAP) is the only intergovernmental body that encompasses the UN's activities in the Asia- Pacific region and has played a pivotal role in strengthening the cooperation for economic and social development within the area. In this regard, Korea actively took part in the ESCAP's efforts. Accordingly, the UN ESCAP Subregional Office for East and North-East Asia (SRO-ENEA) and the Asian and Pacific Training Centre for Information and Communication Technology for Development (APCICT) were both established in Incheon in 2010 and 2006, respectively, and have successfully operated in line with their individual missions.

The 71^st Commission Session of UNESCAP was held under the theme of

"Balancing the three dimensions of sustainable development" in Bangkok on May 25-29, 2015. The session was attended by high-level representatives from 62 member states. As Korea's chief delegate, Lee Tae-ho, Deputy Foreign Minister for Economic Affairs of the Ministry of Foreign Affairs, emphasized the role and importance of the Asia-Pacific region in establishing the Post-2015 Development Agenda and new climate change structure. He also suggested solutions for the region to achieve sustainable development while overcoming resource constraints, such as ▲pursuing continued economic growth with a resource efficient development trajectory, ▲utilizing science and ICT technologies, ▲increasing investments in the development of human resources, and ▲strengthening capacity to mobilize domestic resources. Furthermore, Korea introduced its willingness to cooperate with as well as to contribute to ESCAP as the largest donor.

Furthermore, Deputy Minister Lee met with Shamshad Akhtar, Executive Secretary

of ESCAP, to discuss ways to enhance Korea-ESCAP cooperation as well as to strengthen the role of ESCAP in implementing the Sustainable Development Goals.

In addition, Korea cooperated with ESCAP in various areas. In particular, it launched pilot programs with ESCAP to draw up a low-carbon green growth roadmap for the Asia-Pacific region and developed a study model for higher learning institutions in the Asia-Pacific region by utilizing ICT. At the same time, Korea carried out projects aimed at utilizing ICT to manage disaster risks in the Asia-Pacific region and established an e-government system for women's empowerment. Korea pledged to continue to play a leading role in the economic and social development of the Asia-Pacific region through its active participation in ESCAP activities.

5. World Economic Forum

The annual meeting of the World Economic Forum (widely known as the "Davos Forum)" provides a venue for business leaders, political leaders, and government officials from various countries to come together and discuss current challenges to the global economy and present solutions. The 2015 Davos Forum was held on January 21-24, 2015 under the theme of "The New Global Context."

Foreign Minister Yun Byung-se presented Korea's position on various geopolitical and geoeconomic issues such as changes in the geopolitical environment, the North Korean nuclear issue, increasing terrorism including that of ISIL, and threats to cyber security in an open session on "The Geopolitical Outlook." Furthermore, in sessions entitled "Informal Gathering of World Economic Leaders: The New Global Context for Strategic Competition" and "Informal Gathering of World Economic

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Leaders: Defining the Imperatives for 2015," Minister Yun provided Korea's opinion on global issues such as inter-state conflicts, terrorism, the Post-2015 Development Agenda, and climate change.

In addition, Minister Yun attended Korea Night 2015, organized by the Federation of Korean Industries, and presented the benefits and vision of the reunification of the Korean Peninsula in his keynote address made under the theme of "Journey to One Korea, One Korea Night."

Through one-on-one meetings with the Prime Minister of Turkey; Foreign Ministers of France, Ukraine and Georgia; the UN Secretary-General; the UN High Commissioner for Human Rights; and the UN High Commissioner for Refugees;

Minister Yun enhanced the credibility of Korea's diplomacy, which has contributed to improving the situation on the Korean Peninsula and to solving global challenges.

6. Building a Foundation for Economic Cooperation in Various Areas

The Korean government strived to realize its creative economy initiative by promoting economic cooperation with major partners. It also strengthened its activities with regard to Arctic issues and was granted observer status of the Arctic Council in May 2013. Furthermore, through the efforts to conclude the investment promotion and protection agreements (IPPAs), agreements on social security and so forth, the government endeavored to set up a legal basis for Korean enterprises seeking to make inroads to foreign markets and to combat foreign infringements of intellectual property rights.

1) Diversifying and Strengthening International Cooperation on the Arctic

After joining the Arctic Council as an observer state in May 2013, the Korean government newly adopted the Arctic Policy Master Plan in December 2013 in order to conduct Arctic-related activities in a more systematic manner. Following the Arctic Policy Master Plan, the Korean government published the 2015 Arctic Policy Implementation Plan in April 2015, through which the Korean government reviewed its activities and established new objectives and activities related to the Arctic. Korea actively participated in the Arctic Council's activities for environmental protection and scientific research.

The Korean delegation participated in the Senior Arctic Officials (SAO) meetings on two occasions in 2015, and 11 Korean experts on the Arctic attended six working group meetings and other task force meetings under the Arctic Council. Moreover, Korea strengthened and diversified its bilateral cooperation with major member states of the Arctic Council. In 2015, at the summit meetings with Denmark, the US, Iceland, and China/Japan, agreements on enhanced cooperation regarding Arctic-related issues were signed. The Minister of Foreign Affairs participated in the Global Leadership in the Arctic: Cooperation, Innovation, Engagement and Resilience (GLACIER) Ministerial Meeting held in August 2015 in the US, where a Joint Statement on Climate Change and the Arctic was announced. At this Meeting, Korea discussed ways to extend bilateral cooperation in the Arctic with Norway, Sweden, Denmark, Finland, and Iceland as well as the host state, the US.

Korea also actively participated in Arctic-related international forums in 2015.

In particular, Korean delegates attended the 10^th Arctic Frontiers Conference held in Tromso, Norway in January and the 3^rd Arctic Circle Assembly held in Reykjavik,

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Iceland in October in order to introduce Korea's Arctic policies and seek ways to cooperate with the Arctic countries. At the Arctic Circle, a Korean cultural event called "Korean Night" was held. Cho Tae-yul, Vice Minister of the Ministry of Foreign Affairs, participated in the discussions on sustainable development of the Arctic as he has been appointed as a member of the Global Agenda Council on the Arctic of the World Economic Forum (WEF).

Korea vowed to continue to join in the international efforts for the environmental protection and sustainable development of the Arctic by strengthening and diversifying bilateral cooperation with Arctic Council member states and by continuously participating in various multilateral meetings of the Arctic Council.

2) Supporting the Realization of Creative Economy Based on Science and Technology

Having developed into the world's sixth most competitive country in the field of science and technology, Korea's scientific and technological capacities have become a key resource for the Korean economy to grow and advance forward.

Recognizing the importance of science and technology, the Korean government actively carried out a variety of creative economic policies, which created new markets and jobs through creativity and innovation. Korea also strived to enhance cooperation with other leading countries in the field of science, technology, and information communication technology.

Notably, on the occasion of various summit meetings, President Park Geun-hye agreed with her counterparts of the US, Canada and France to pursue cooperation in areas related to creative economy. In October 2015, at the summit between Korea and the US, the two leaders agreed to conclude a Framework Agreement

for Cooperation in Aeronautics and the Exploration and Use of Airspace and Outer Space for Civil and Peaceful Purposes at the earliest possible date. In July 2015, Korea and Canada initialed and initiated their respective domestic procedures for an Agreement on Science, Technology and Innovation, which the two leaders agreed to conclude at the summit in March 2014. At the summit in November 2015, the two presidents of Korea and France reached an agreement to deepen cooperation to nurture global start-ups based on creativity and innovation and to hold the Second New Industrial Technology Cooperation Forum as a follow-up to the 2013 summit.

In addition, Korea concluded an Agreement on Science and Technology with Turkmenistan in April 2015. The Korean government made efforts to facilitate joint research projects by holding joint committee meetings on science and technology with the UK, the Czech Republic, Hungary, Sweden and Finland. Furthermore, the Korean government supported networking among related experts by holding twenty creative economy forums to facilitate smooth cooperation among research institutes at home and abroad through diplomatic missions abroad.

3) Concluding and Revising Economy-related Agreements on Promotion and Protection of Investments and Social Security

The Korean government strived to conclude economic agreements so as to help Korean enterprises and nationals enter overseas markets. In order to protect Korean companies from non-commercial risks (e.g. property loss caused by expropriation), which they might encounter when investing abroad, the Korean government continuously made efforts to conclude investment promotion and protection agreements (IPPAs). In 2015, it held negotiations and consultations to conclude

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IPPAs with Turkmenistan, Sudan, Armenia and Ethiopia.

The Korean government also continuously pursued social security agreements for the purpose of preventing Korean companies and employees from making double social security payments and enhancing their pension rights by allowing their periods of pension enrollment in Korea and other countries to accrue. In 2015, Korea signed social security agreements with Chile and Finland, a social security understanding with Quebec, Canada and an exchange of notes to revise social security agreements with Uzbekistan. In addition, the Korean government signed agreements with Peru and Slovenia and held working-level negotiations with Vietnam, New Zealand and Russia to agree on the text of the agreements.

Furthermore, the Korean government concluded double taxation avoidance agreements, which adjust the taxation rights between relevant nations so as to prevent double taxation on the corporate earnings of Korean enterprises operating abroad. In 2015, Korea signed an agreement with Turkmenistan and completely revised its agreement with India.

Through the efforts to conclude air service agreements with newly industrialized economies, the Korean government strengthened the foundation for the exchanges of people and goods, expanded the national airlines service network, and increased consumer benefits. In 2015, the government signed agreements with Croatia, Papua New Guinea and Tajikistan, and completely revised its agreements with Morocco and Austria. The government also initialed the text of a new air service agreement with Zimbabwe.

4) Remedies for Overseas Intellectual Property Rights Infringement

As Korean enterprises expand their businesses abroad and the Korean wave

continues to gain popularity worldwide, the number of international patent disputes involving Korean companies and overseas intellectual property rights infringement cases on Korean products are on the rise.

The Ministry of Foreign Affairs designated 40 overseas embassies including those located in the US, China, Japan, Geneva, and Belgium as Intellectual Property Protection Centers and worked together with other related ministries and organizations such as the IP-DESK (Centers for Overseas Intellectual Property Rights) under the Korean Intellectual Property Office and Centers for Overseas Copyrights under the Ministry of Culture, Sports, and Tourism.

In June 2015, the Ministry of Foreign Affairs held an IP workshop at the Korean Embassy in Beijing with the participation of Korean diplomats in charge of overseas IP protection. The participants discussed ways to cooperate with the private sector in order to prevent and address infringement cases.

The Korean government vowed to continue to make efforts to protect the overseas intellectual property rights of Korean companies with such measures as enhancing cooperation with foreign IP authorities and helping IP officials build expertise.

5) Responding to IUU Fishing

In 2013, the United States and the European Union enlisted Korea on the preliminary illegal, unreported and unregulated (IUU) fishing status list, due to its lack of punishment and control over vessels engaged in IUU fishing. In response, not only the Ministry of Ocean and Fisheries, but the Korean government as a whole, including the Ministry of Foreign Affairs, endeavored to eliminate IUU fishing.

Through bilateral meetings and diplomatic channels, the Korean government Chapter 1 Multilateral & Regional Economic Diplomacy

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Economic Cooperation Capacity Chapter 2 Energy & Resources Cooperation and

Green Growth & Environmental Diplomacy

actively showed to the United States and the EU the progress made in eradicating IUU fishing including the enactment of the Distant Water Fisheries Development Act and installation of a Vessel Monitoring System on all Korean-flagged distant water fishing vessels. As a result, the United States and the EU delisted Korea from the preliminary IUU fishing status list in February and April 2015, respectively.

The Korean government pledged to continue its efforts to expand its role as a responsible member in fisheries by actively joining the international efforts to establish marine governance.

Energy & Resources

Cooperation and Green Growth

& Environmental Diplomacy

Chapter 2 1. Energy & Natural Resources Cooperation Diplomacy

1) Korea's Diplomatic Efforts in Energy & Resources Cooperation

In 2015, the Ministry of Foreign Affairs of the Republic of Korea (MOFA) further strengthened its diplomatic efforts for Korea's exportation of nuclear reactors.

MOFA paved the way for exporting SMART (System-integrated Modular Advanced ReacTor), a domestically developed small-medium sized reactor, by supporting the signing of an MOU with Saudi Arabia on a joint partnership and human resources development. This was accomplished on the occasion of President Park Geun-hye's visit to four Middle Eastern countries in March. MOFA supported the signing of a SMART PPE (Pre-Project Engineering) agreement between the Korea Atomic Energy

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Research Institute (KAERI) and King Abdullah City for Atomic and Renewable Energy (K∙A∙CARE) of Saudi Arabia in September.

Through the leaders' mutual visits, including Prime Minister Bohuslav Sobotka's visit to Korea in February and President Park Geun-hye's visit to the Czech Republic in December, MOFA has sought to establish a favorable foundation to participate in the Czech Republic's new nuclear power plant projects, worth more than ₩10 trillion. It also contributed to seeking various ways to improve the substantial cooperation between Korea and the Czech Republic in the area of nuclear power generation by holding the Joint Economic Committee meeting in October and the Nuclear Cooperation Joint Committee meeting in December.

MOFA also made efforts to seek ways to boost cooperation on energy and resources at bilateral, regional and global levels by organizing various energy consultation activities, such as the 2^nd North East Asia Energy Hub Symposium in June, the Global Energy Security Conference in September, the 3^rd Northeast Asia Energy Security Forum in December and the Seminar on Strengthening Korea-Iran Energy & Economic Cooperation in September.

Meanwhile, MOFA provided active diplomatic support to hold the 7^th World Water Forum (WWF) in Daegu and Gyeongsangbuk-do in April with its largest

7^th World Water Forum (Daegu, April 12, 2015) Global Energy Security Conference (Seoul, September 15, 2015)

attendance to date comprised of 168 countries and about 46,000 participants.

MOFA also vigorously engaged in the discussions to resolve global water-related issues through the adoption of the Ministerial Declaration, the creation of the Daegu-Gyeongbuk International Water Week as well as the establishment of the World Water Partnership. On the margins of the 7^th WWF, MOFA helped to organize the Water Business Forum (WBF).

2) Pursuing a Northeast Asia Nuclear Safety Consultative Body

MOFA has exerted its efforts to build up the foundation to pursue the Northeast Asia Nuclear Safety Consultative Body, which is suggested by President Park Geun- hye for the purpose of promoting nuclear safety cooperation in Northeast Asia under the Northeast Asia Peace and Cooperation Initiative (NAPCI).

MOFA established bilateral dialogue channels at both working and senior levels with Japan and China, which are core partner countries in establishing the Consultative Body. MOFA also initiated a trilateral discussion by holding a Stock- taking Meeting on Nuclear Safety Cooperation among Korea, Japan and China in Seoul in September.

Furthermore, MOFA held the International Forum on Northeast Asia Nuclear Safety Cooperation (the 3^rd Top Regulators Meeting+) in Seoul in October, in which it presented the principles and ways for pursuing the Northeast Asia Nuclear Safety Consultative Body and broadened the international community's understanding on

International Forum on Northeast Asia Nuclear Safety Cooperation (the 3^rd TRM+)

(Seoul, October 22, 2015)

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them.

Meanwhile, in the Korea-Japan-China trilateral summit on November 1, the three leaders reached an agreement to strengthen regional civil nuclear safety cooperation and thus further fortified the political momentum for the pursuing of the Northeast Asia Nuclear Safety Consultative Body.

In addition, MOFA established a domestic collaborative framework with relevant ministries and agencies on the nuclear safety issue and contributed to forming a domestic consensus on the pursuing of the Northeast Asia Nuclear Safety Consultative Body by supporting the organization of the national symposium on Northeast Asia Nuclear Safety on August 26.

3) Engaging with the Global Energy Issue for Climate Change Responses

The Republic of Korea participated in the inauguration of the Mission Innovation, initiated by US President Barack Obama, on the occasion of the UNFCCC COP 21 in Paris in November 2015. Mission Innovation is an international commitment among 20 major states, including the Republic of Korea, the US, France, the UK, Japan and China to double their investment in clean energy research and development over the next five years in order to achieve technology innovation and thus cope with climate change. In the process of deciding to join the initiative, MOFA played the critical role of coordinating the positions of relevant ministries and consulting with leading countries such as the US and France.

MOFA, for the last two years, has continuously participated in the discussion within OECD on the restrictions of official export credits for coal-fired power plants putting emphasis on achieving a balance between climate change responses

and energy welfare in developing countries. Its efforts contributed to reaching an agreement among the member countries at the joint meeting of the working party on Export Credits and Credit Guarantees in OECD in November.

MOFA also actively took part in the discussion of global energy issues in international fora such as the International Energy Agency (IEA), the International Renewable Energy Agency (IRENA), the OECD/Nuclear Energy Agency (OECD/NEA) and the G20 to enhance energy access and energy efficiency in addressing climate change.

4) Strengthening Public-Private Energy Cooperation through Energy Diplomacy Infrastructures

In 2015, MOFA continued its role to broaden new business opportunities abroad for energy-related Korean enterprises

through 50 diplomatic missions and 26 energy consultants. These 50 diplomatic missions, which are dispatched to major countries with abundant natural resources or growing energy markets, have contributed to strengthening bilateral cooperation on energy and resources by hosting various energy events in collaboration with the governments of residing countries, collecting up-to-date information on local energy resources, and building professional networks.

In addition, the Global Energy Cooperation First Issue of the Diplomatic Journal for Global Energy Cooperation

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Center (GECC) under MOFA has served as a holistic information center in supporting Korean energy companies to advance into overseas markets since its establishment in 2012. The GECC, based on the latest energy and resources information collected from the overseas Korean diplomatic missions, has distributed the Daily/Special Energy Report and International Energy and Resource Bidding Information to approximately 3,000 subscribers including domestic energy companies, organizations, and associations. The GECC published its first semi-annual Diplomatic Journal for Global Energy Cooperation to provide a platform for discussions on the analysis of the energy security environment and the pursuit of the direction of energy policies and issued two versions in 2015.

2. Green Growth Diplomacy

The Korean government is pushing forward the green growth agenda aggressively.

The Global Green Growth Institute (GGGI), an international organization founded under the leadership of the Republic of Korea, increased its membership to 25 states with Hungary's accession in 2015. The GGGI is now assisting over 20 developing countries, including the Philippines, Mongolia and Ethiopia, in their development and implementation of green growth strategies. The GGGI has stepped up cooperation with international organizations and enhanced its international profile by launching the Inclusive Green Growth Partnership with multilateral development banks and UN regional economic and social commissions in December. The Korean government actively participates in the GGGI's overall decision-making processes through GGGI meetings and frequent consultations with the GGGI Secretariat and member states. In addition, the Korean government actively supports the

Chapter 2 Energy & Resources Cooperation and Green Growth & Environmental Diplomacy

GGGI in its successful implementation of its mid- and long-term strategic plan (2015-2020) for the improvement of the organization's competency. The Korean government encourages new membership and contributions to the GGGI on important diplomatic occasions, such as bilateral meetings and joint commissions, international conferences. In the years ahead, Korea will continue to support the GGGI so that it may develop as a competitive international organization leading global green growth.

The Korean government is also strengthening bilateral cooperation with major green growth partner countries such as Denmark. Korea and Denmark established the Korean-Danish Green Growth Alliance in 2011, the first value alliance, and have since held the annual Korean-Danish Green Growth Alliance Meeting. The 5^th Meeting of the Alliance, led by the Korean Minister of Oceans and Fisheries and the Danish Minister of Business and Growth, was held in Copenhagen, Denmark in October 2015 under the theme of "International Maritime Environment and Climate Regulation, Exploration of Renewable Marine Resources to Cope with Climate Change." During the meeting, means of exchange and cooperation between the governments, research institutions and private sectors of Korea and Denmark were discussed, and the two countries signed an MOU between the shipowners' associations.

The Korean government also sends water & environmental market development teams primarily to new promising markets and regions that are difficult for private entities to access, in cooperation with the Ministry of Environment, competent agencies, and companies, in order to strengthen environmental cooperation with the countries concerned and introduce Korea's water & environment technologies.

In 2015, the water & environmental market development teams were sent to Southeast Asia, the Middle East, Africa, and Eastern Europe for 556 consultation

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meetings. In November 2015, the Korea-Latin America Water and Environment Forum was co-hosted by the Ministry of Foreign Affairs and the Ministry of Environment to lay the groundwork for Korea's water & environmental industries to advance into Latin America.

3. Establishing a New Climate Change Regime

At the 21^st Conference of Parties to the United Nations Framework Convention on Climate Change (COP21) (November 30 - December 11, Paris), Parties to the UNFCCC successfully adopted the Paris Agreement, which sets out a legal framework for a new climate change regime. In 2015, Korea participated in major climate change meetings, both formal and informal, including the COP21, Major Economies Forum (MEF), Petersburg Climate Dialogue, and Cartagena Climate Dialogue. At these meetings, Korea forwarded its views and played a bridging role between developed and developing countries, thereby constructively contributing to the successful adoption of the Paris Agreement.

The Paris Agreement is universal; all Parties participate in addressing climate change. Its long-term goal is to hold the increase in the global average temperature to well below 2℃ above pre-industrial levels. It requires all Parties to put forward their nationally determined contributions (NDCs). It calls for enhanced transparency of action and support by Parties through a more robust Keynote Speech at the 21^st Conference of the

Parties, United Nations Framework Convention on Climate Change (Paris, November 30, 2015)

transparency framework with flexibility. There will also be a global stock-take every five years to assess the collective progress towards achieving the purpose of the Paris Agreement.

As a leading country in combating climate change, Korea participated in the global efforts to draw out a new climate regime by presenting its ambitious 2030 greenhouse gas reduction target. Further, at the Leaders Event at the COP21, President Park Geun-hye introduced Korea's climate change policy. Korea considers addressing climate change to be a window of opportunity to secure a new growth engine. President Park played a leading role in the transition to a low-carbon global economy by sharing the nation's know-how and its new energy business model with developing countries as a way of supporting their response to climate change. Korea will continue to actively participate in subsequent negotiations for implementing the Paris Agreement.

In 2015, advanced countries further supported developing countries in their adaptation to climate change and mitigation of greenhouse gases. The Parties to the UNFCCC in December 2015 set a global goal of US $100 billion per year to finance the adaptation and mitigation plans and decided that the Green Climate Fund (GCF) and the Global Environment Facility (GEF) would be the operational entities for climate financing. This helped to create a consensus in the international community that the GCF, headquartered in Korea, will develop as a main mechanism to support adaptation and mitigation efforts.

The GCF began its full operation in November by approving the funding for eight adaptation and mitigation projects implemented by developing countries. The Korean government supports developing countries in their search for GCF projects by developing four Korean-type climate change business models (electric power supply through renewable energy coupled with the energy storage system (ESS);

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green energy towns; electric vehicles and related infrastructure; and smart farms) to help them make full use of the GCF. The eight approved funding projects included the Wetlands Resilience Building project in Peru, which applied a Korean business model (electric power supply through renewable energy coupled with the energy storage system).

4. Enhancing Environmental Cooperation

1) Enhancing Regional Environmental Cooperation in Northeast Asia

In Northeast Asia, environmental problems such as yellow dust, acid rain, marine pollution are becoming increasingly severe due to the region's high population density and fast economic growth. As environmental threats seriously affect all countries in the region due to the geographic proximity between neighboring countries, Northeast Asian nations are seeking bilateral and regional cooperation in tackling these issues.

Through bilateral joint committees on environmental cooperation with China, Japan and Russia, Korea has been reviewing its environmental policies and situation as well as engaging in cooperation projects in broad-ranging areas including air and marine pollution, climate change, marine debris, and biodiversity.

In November 2015, the 20^th meeting of the Joint Committee on Environmental Cooperation between Korea and China was held in Beijing during which both countries examined bilateral cooperative projects on air pollution and environmental industry fields and discussed future plans. In May 2015, the 17^th meeting of the Joint Committee on Environmental Cooperation between Korea

and Japan was held in Tokyo during which both countries agreed to cooperate in various fields including marine pollution.

Furthermore, Korea took part in the Northeast Asia Sub-regional Programme for Environment Cooperation (NEASPEC) with China, Japan, Russia and Mongolia to jointly address various environmental challenges including yellow dust, air and marine pollution, and the preservation of the region's ecosystem. Furthermore, an Intergovernmental Meeting of the Northwest Pacific Action Plan (NOWPAP) with participation from Korea, China, Japan and Russia has been held on an annual basis to discuss ways to protect the marine and coastal environment. In October, the 20^th Intergovernmental Meeting was held in China during which member countries discussed the status of restructuring the Regional Coordination Unit (RCU) and preparations for a medium-term strategy for 2018-2023.

2) Strengthening International Cooperation for Environmental Protection

Global environmental issues cover a wide range of areas including air, ecosystems, ocean, and hazardous wastes and chemical substances. More than 160 international conventions are in effect with the support of the UN and the OECD.

To date, Korea has acceded to a number of leading international conventions on the protection of the environment such as the Convention on Biological Diversity (CBD, signed in 1994), the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES, signed in 1993), the United Nations Convention to Combat Desertification (UNCCD, signed in 1999), the Ramsar Convention on Wetlands (signed in 1997), and the International Tropical Timber Organization (ITTO, signed in 1985), and those on the management of chemical and toxic substances

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such as the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal (signed in 1994), the Stockholm Convention on the Persistent Organic Pollutants (signed in 2001), the Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade (signed in 1999), and the Minamata Convention on Mercury (signed in 2014). The Republic of Korea actively takes part in the discussion of and response to such global environmental issues as the protection of biodiversity, sustainable use of resources, and international management of chemical and toxic substances through these Conventions.

Chapter 3 Bilateral Trade Diplomacy

Bilateral Trade Diplomacy

Chapter 3 1. Economic Relations with Major Trading Partners

1) Korea-China Economic Diplomacy

Remarkable progress has been made in strengthening the economic relations between Korea and China since the two countries established diplomatic relations in 1992. China has been Korea's second-largest foreign investment destination since 2002 and its largest trading partner since 2003.

The trade volume between the two countries has risen sharply. It soared from a mere US $6.4 billion in 1992 to US $220.6 billion in 2011, surpassing the US $200 billion mark within just two decades since the establishment of diplomatic relations.

As of 2015, the bilateral trade volume amounted to US $227.4 billion, accounting for 23.6% of Korea's total trade. The trade volume has expanded by 36 times since 1992. However, since the Chinese economy has entered a "new normal" situation, it is very likely that the trade between Korea and China will not grow as rapidly as before.

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4 Trend in Korea-China Trade since 1992

source Korea International Trade Association

Korea's cumulative investment in China during the years 1968 to 2015 reached US $69.86 billion, and Korea's investment in China in 2015 alone amounted to US

$4.3 billion. However, China's cumulative investment in Korea during the same time period only amounted to US $8.11 billion. Given that China is trying to invest more in other countries and Korea is making efforts to attract Chinese capital, China's investment in Korea is expected to increase further.

Chapter 3 Bilateral Trade Diplomacy

150

1992 1995 2000 2005 2010 130

110 90 70 50 30 10 -10

240 190 140 90 40 -10

Exports/Imports Trade Volume/Balance

(unit: US$ billion)

9.1 18.5 61.9

7.4 12.8 38.6

16.5 31.3 100.5

1.7 5.7 23.3

116.8 71.6 188.4

45.3

2011 2012 2013 134.2 134.3 145.9

86.4 80.8 83.1

220.6 215.1 228.9

47.8 53.5 62.8

2014 145.3 90.1 235.4

55.2 2015 137.1 90.3 227.4

46.9 2.7

3.7 6.4 -1.1 Exports Imports Trade Volume Balance

Trend in Korea-China Investment

source Ministry of Trade, Industry and Energy, The Export-Import Bank of Korea

In 2015, President Park visited China to attend the celebration ceremony of the 70^th anniversary of China's victory over Japan in the Second World War, and Chinese Prime Minister Li Keqiang made his official visit to Korea. On these occasions, leaders of the two countries met and discussed issues of mutual interest such as the early entry into force of Korea-China FTA, reduction of non-tariff barriers, linking two countries' development strategies, promoting financial cooperation, and facilitating trade and investment and agreed to work together more closely in these areas.

During Chinese Prime Minister Li's visit to Korea, leaders were able to lay a strong foundation for boosting the economic cooperation between the two countries by signing 15 MOUs, including a MOU on strengthening the link between China's One Belt One Road policy and Korea's Eurasia Initiative, a MOU on Manufacture and Innovative Industry Cooperation, and a MOU on the joint exploration of third-party

2006 2007 2008 2009 2010 2011 2012 2013

Annual Investment Cum. Investment

(unit: US$ billion) 7

8 70

60 50 40 30 20 10 0 6

5 4 3 2 1 0

0.0 0.4 0.3 0.2 0.4 0.7 0.7 0.5

4.5 7.1 4.9 2.7 4.4 4.8 6.5 4.8

1.8 2.2 2.5 2.7 3.1 3.7 4.5 4.9

26.3 33.4 38.3 41.0 45.4 50.2 56.7 61.6

2014 1.2 3.8 6.1 65.5

2015 2.0 4.3 8.1 69.9 China’s Investment in Korea

Korea’s Investment in China Cum.Investment in Korea Cum.Investment in China

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Economic Cooperation Capacity Chapter 3 Bilateral Trade Diplomacy

markets. Leaders also agreed to work together to increase financial cooperation and establish a KRW-RMB direct trading market in China.

Both countries agreed to officially sign a free trade agreement on June 1, 2015, and effectuate the agreement within 2015, and as a result, the Korea-China FTA entered into force as of December 20, 2015. With the FTA and Korea's largest trading partner in effect, Korean companies will be provided with more business opportunities in the Chinese market, thus contributing to the growth of the Korean economy. The FTA is also expected to help take the comprehensive economic cooperation between the two countries to the next level.

In addition, Korea strengthened cooperation with the provincial and local governments of China to support Korean businesses in the Northeast and Midwest provinces of mainland China. This is also in line with China's recently adopted initiative to boost domestic demand and achieve a more balanced growth between urban and rural areas. To this end, various events including the Korea-Guangdong Development Forum (Jan. 26, Guangzhou), the Korea-12 West Provinces Economic Cooperation Forum (May 25, Xian), the Korea-Shandong Economy and Trade Cooperation Forum (Jun. 5, Jinan), the Korea-Hubei Economic Cooperation Forum and Friendship Week (Oct. 28, Wuhan), and the Korea-3 Northeast Provinces Economic Cooperation Forum (Dec. 11, Seoul) were held in 2015.

The Korean government will make continued efforts to expand trade and investment with China and prevent trade friction. It will also work to increase its economic cooperation as well as policy consultations on macroeconomic issues with China to develop joint responses to risks in the global economy.

2) Korea-Japan Economic Diplomacy

Since the establishment of diplomatic ties in 1965, the economic relations between Korea and Japan have grown continuously. The bilateral trade volume grew from a mere US $220 million in 1965 to US $108 billion in 2011. As of 2015, Korea and Japan are the third largest trading partners to each other.

Japan introduced a set of policies called Abenomics in 2012 to revive its sluggish economy, and this has brought about the depreciation of the Japanese yen. The combination of Japan's slow economy, structural changes in the Japanese industry, the weakened yen, and shaky Korea-Japan relations has caused Korea's exports to Japan to go down since 2012. The volume of Korea's exports to Japan shrank by more than 20% from US $32.2 billion in 2014 to US $25.6 billion in 2015. The total trade volume also decreased from US $94.7 billion in 2013 to US $86.0 billion in 2014 and US $71.5 billion in 2015.

Trend in Korea-Japan Trade since 1965

(unit: US$ billion)

120 100 80 60 40 20 0 -20 -40 -60 80

60 40 20

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 0

-20 -40

0.0 0.2 1.3 3.0 4.5 12.6 17.0 20.5 24.0 28.2 25.6

0.2 0.8 2.4 5.9 7.6 18.6 32.6 31.8 48.4 64.3 45.9

0.2 1.0 3.7 8.9 12.1 31.2 49.6 52.3 72.4 92.5 71.5

-0.1 -0.5 -1.1 -2.8 -3.1 -6.0 -15.6 -11.3 -24.4 -36.7 -20.3

Exports Imports Trade Volume Balance

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Korea has never recorded a trade surplus with Japan since the establishment of diplomatic relations in 1965, and the trade deficit hit the highest level in 2010 at US $36.1 billion. However, Korea's trade deficit with Japan has continued to decrease for four consecutive years, recording US $25.4 billion in 2013, US $21.6 billion in 2014 and US $20.3 billion in 2015 thanks to the narrowing deficit gap in major components and materials trade due to increased domestic production and diversified import sources.

As a means to reduce the trade deficit with Japan, the Korean government has formulated policies to strengthen the competitiveness of its companies as well as to provide the necessary infrastructure. It has also made various efforts to promote bilateral cooperation in the components and materials industry.

Meanwhile, Japan is the second-largest investor in Korea following the United States. Its cumulative investment in Korea from 1962 to 2015 amounted to US

$39.7 billion, which accounts for 15.4% of the total foreign investment in Korea.

Japan's investment in Korea has continued to increase since 2007 and recorded US $4.5 billion in 2012 thanks to the Korean government's efforts to attract foreign investment. In 2013, Japan's investment in Korea started to decrease due to the weak yen and the increase in Korea's electric charges went down to US $2.5 billion in 2014 and US $1.7 billion in 2015.

Trend in Korea-Japan Investment

In order to revitalize the weakened economic and trade relations between Korea and Japan, governments held bilateral consultations at various levels such as ministers' meetings and high-level economic consultations, which served as venues to promote understanding and cooperation between the two countries.

To celebrate the 50^th anniversary of the reestablishment of diplomatic relations, the Korea-Japan Summit Meeting was held on November 2, 2015, in Seoul for the first time in three and a half years. Leaders agreed to accelerate the negotiations for the CJK FTA and the RCEP and exchanged views on ways to achieve comprehensive and future-oriented economic cooperation between the two countries by encouraging Korean and Japanese companies to launch joint projects in a third country, promoting LNG cooperation, and increasing the exchange of talented youths. They reaffirmed their commitment to work together to further strengthen economic cooperation.

2006 2007 2009 2010 2011 2012 2013

(unit: US$ billion) 5.0 4.5 3.5 2.5 1.5

35 30 25 20 15 10 5 0 4.0

3.0 2.0 1.00.5 0.0

40

2.1 1.0 1.9 2.1 2.3 4.5 2.7

0.3 0.8 0.4 0.4 0.3 0.7 0.9

19.5 20.5 23.9 26.0 28.3 32.8 35.5

1.8 2.6 3.7

2008 1.4 0.6 22.0

3.3 4.0 4.3 4.9 5.8

2014 2.5 0.6 38.0 6.4

2015 1.7 1.8 39.7

8.1 Japan’s Investment in Korea

Korea’s Investment in Japan Cum.Investment in Korea Cum.Investment in Japan

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The European Union (EU) is Korea's third largest trading partner following China and the United States, and Korea is the EU's eighth largest trading partner. The trade volume between Korea and the EU reached US $105.3 billion in 2015.

The trade between Korea and the EU has been on an upward trend since 2009, reaching a record high of US $114.1 billion in 2014. However, in 2015, due to the overall economic downturn in the EU, the trade volume decreased by 7.7%

compared with the previous year at US $105.3 billion. Korea's exports to the EU amounted to US $48.1 billion, accounting for 9.1% of Korea's total exports thanks to the strong sales in ships, automobiles, automobile parts, synthetic resin, and flat panel displays. Korea's imports from the EU amounted to US $57.2 billion, accounting for 13.1% of its total imports. Major import products are automobiles, pharmaceutical products, semiconductor manufacturing equipment, automobile parts, and crude oil.

The EU is the largest investor in the Korean market with a cumulative investment of US $81.2 billion between 1962 and 2015. The EU's annual investment in Korea reached US $2.5 billion in 2015. Korea's investment in the EU in 2015 also reached US $2.4 billion with a cumulative investment of US $54.5 billion between 1968 and 2015.

Trend in Korea-EU Trade

Trend in Korea-EU Investment

70

2006 2007 2008 2009 2010 2011 2012 2013 60

30 20 10 0

140 100 120

60 80

40 20 -20

(unit: US$ billion)

48.5 56.0 58.4 46.6 53.5 55.7 49.4 48.9

30.1 36.8 40.0 32.2 38.7 47.4 50.4 56.2

78.5 92.8 98.4 78.8 92.2 103.2 99.7 105.1

18.4 19.2 18.4 14.4 14.8 8.3 -1.0 -7.4

2014 51.7 62.4 114.1 -10.7

2015 48.1 57.2 105.3 -9.1 40

50

0

Exports Imports Trade Volume Balance

EU’s Investment in Korea Korea’s Investment in the EU Cum.Investment in Korea Cum.Investment in the EU

2006 2007 2008 2009 2010 2011 2012 2013

(unit: US$ billion)

90 80 70 50 30 40

10 0 8

9 7 6 5 3 2

60

20 4

1 0

5.0 4.3 6.3 5.3 3.2 5.0 2.7 4.8

2.8 3.0 3.1 4.9 7.8 3.8 5.3 5.2

40.52 44.8 51.2 56.5 59.7 64.7 67.4 72.2

14.5 17.5 20.6 25.5 33.4 37.2 42.5 47.6

2014 6.5 4.5 78.7 52.1

2015 2.5 2.4 81.2 54.5