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Steps for Korea's 'graduation'

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By Ahn Ho-young

The Ministry of Foreign Affairs announced July 4 that the United Nations Conference on Trade and Development (UNCTAD) decided to classify Korea as a developed nation during its recent board meeting in Geneva.

It was interesting for me to observe how the news was reported in the Korean news media. On the one hand, it was widely reported that it was the first time that the UNCTAD upgraded a country's classification from "developing" to "developed" since its establishment in 1964.

At the same time, it was also widely reported that Korea's "graduation" had taken place through many steps. Many articles as an example of preceding steps referred to Korea's accession to the Organization for Economic Cooperation and Development (OECD) and subsequent accession to the OECD's Development Assistance Committee. While thinking that Korea's "graduation" is still a work in progress, I want to share my own experiences of having worked on Korea's accession to the OECD in 1996.

Then President Kim Young-sam, as soon as he was inaugurated in 1993, focused on internationalization and globalization as important foreign and economic policy goals. As a director for international trade at the foreign ministry, I was much encouraged by this, because I thought that was the right way to go for Korea as a nation in the post-Cold War world, where erstwhile ideological confrontations were being replaced with reconciliation and cooperation, and where new economic and diplomatic opportunities were emerging for Korea. Edward Luttwak used to sum up the trend of the time as "from geo-politics to geo-economics," which became one of my favorite quotes.

It was against such a backdrop that the Korean government decided to join the OECD. Korea submitted an application for membership in March 1995. In the following month, Korea opened an accession office in Paris, which I joined the following year.

The OECD decided to conduct an examination and review of Korean laws and regulations in 11 committees on such issues as capital movements, international investment, international trade, banking, insurance policies, labor relations, education, agriculture, climate change, environment and maritime transportation.

Examination and review of certain issues were closely related with structural issues in the Korean economy and society, and proved to be more challenging. One such issue was Korea's developing country status, which emerged as a critical issue in the OECD Trade Committee's review.

In the end, Korea summed up its position on the developing country status along the following lines: Korea had participated in the Uruguay Round as a developing country and would have to maintain the same status for its implementation. However, Korea will participate in the subsequent multilateral trade negotiations as an OECD member with exceptions in the two sectors of agriculture and climate change.

Korea, when its developing country status was subsequently challenged in many different international fora, especially in the WTO meetings, used to carefully hold onto the above-stated "OECD formula" of its developing country status.

It continued until 2019, when Korea decided to give up the exception on agriculture. The exception in the climate change sector became moot in my view with the emergence of the concept of nationally determined contributions (NDCs) and Article 9 in the Paris Climate Accords.

Another issue of particular difficulty and importance was Korea's implementation of the OECD Codes of Liberalization of Capital Movements and Current Invisible Operations. Adherence to the codes was an important indicator of the applying economy's compatibility with the OECD principles. At the relevant joint committees, as an "OECD observer" later reported, Korea agreed to immediately implement only some 65 percent of the OECD's Codes of Liberalization.

However, Korea maintained that past efforts the country had made for liberalization of capital movement, services and investment strongly demonstrated its commitment to greater liberalization. The relevant committees acknowledged such assurances of the Korean government.

Almost the last committee to wrap up Korea's examination and review was the Committee on Employment, Labor and Social Affairs (ELSAC). Even after Korea's accession to the OECD in December 1996, ELSAC deemed that Korea's subsequent reform was short of the commitments made by Korea. The committee continued to monitor Korea's progress on labor relations reform until 2007.

Less than a year after its accession to the OECD, Korea was mired in the Asian financial crisis, which was attributed partly in Korea to "premature" accession to the OECD. Korea tried and succeeded in escaping from the crisis through reform in four sectors which accelerated, rather than retracted, liberalization. It was for this reason that the financial crisis was labeled as a "blessing in disguise" for Korea by many observers abroad.

But, it was not until 10 years later in 2008, during the global recession when I was working as a G20 sherpa, that I could better appreciate that the reform in four sectors, introduced and implemented during the Asian financial crisis, was in fact timely in further streamlining the Korean economy, which eventually dampened the impact of the global recession.

Ahn Ho-young ( is president of the University of North Korean Studies. He served as Korean ambassador to the United States and first vice foreign minister.


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