2013

Kor-Can bilateral trade: partners in the new frontier, the OECD (Pt. 3)

Simplification is dangerous, because this world is in fact very complicated (note that this is in itself a simplification). People simplify, not for the truth of the simpleness, but because it is a tool, which allows more efficient thought processes. For this reason, the labels such as “developed” nation, as opposed to a “developing” nation, need to be used with care.

The limitation of the simple notions of developed versus developing nations becomes even more apparent when we track a specific country, and attempt to pinpoint a time and the reason for the metamorphosis from a developed from developing status.

Korea is an excellent example. As your grandparents remember, Korea is a war-destroyed country, often confused with neighbouring giants, Japan and China. However, as you know it, Korea is a high-tech, trend-leading place, a home to Gangnam Style and the latest gadgets. The story of Korean development is a topic of many studies and envies of many , both of which deserving far detailed studies than what I can offer in this blog.

However, notable turning points in the Korean development have taken place on or after Korea’s entrance into the global arena. As I have alluded in the last week’s blog, Korean participation in the Kennedy Round of GATT in 1967 was followed by rapid growth during the 70s through the 90s. Similarly, Korea’s accession into the Organization for Economic Co-operation and Development (OECD) in 1997 was followed by rapid economic liberalization and growth.

Korea joined OECD in 1997 (December 1996 to be exact), as the 29th member country  and only the second Asian country after Japan. As the name suggests, OECD is a forum for economic development. It is first and foremost a policy forum, in order to promote sustainable economic growth based on liberalization and market economy principles. OECD is an exclusive organization, composed only of 34 members, mostly the conventional “western” power countries including Canada.

However, being a member of OECD is far more than a bragging right. A membership into OECD means complying with its obligations under the Codes of Liberalization, including national treatment and non-discrimination principles. These are arguably for Korea’s own benefits also (in principle at least). However, there are larger, positive responsibilities other than simply abiding by the obligations – after all, much of the Code had already been established under the GATT and WTO when Korea joined OECD.

The larger meaning of being an OECD member is embodied in OECD’s mission, which states “to promote policies that will improve the economic and social well-being of people around the world”. Its members are to be the leaders in the global market place, providing crucial benchmark policies that can be modeled after by other nations. In addition, the OECD members are also policy laboratory researchers,  bouncing off new ideas and pushing the boundaries of the full-employment economy.  

A case in point is Korea’s role in OECD during the Asian Financial Crisis in 1997 compared to the 2008 Global Financial Crisis. In the former, as a newly joined member of OECD, Korea reacted through following recommended policy measures, after the market disturbance had already affected the country. In the latter, Korea proactively implemented policy measures in the wake of the crisis, including the largest fiscal stimulus package in the OECD area. The policy measures largely absorbed adverse effects of the global crisis in Korea, which has rebounded almost unscratched from the one of the most devastating financial crisis ever to the man kind (Trutsumi, Jones & Cargill, “The Korean Financial Systems: Overcoming the Global Financial Crisis and Addressing Remaining Problems”, OECD Economics Department Working Papers, July 28, 2010, online at here ).

Today, Korea is a member of OECD’s Development Assistance Committee (DAC) together with Canada and other 22 fellow member nations. DAC is a committee that provides aids and supports developing countries, with which Korea pledged to commit support package of 0.25% of its GDP by 2015 (Kim, Korea’s Evolving Role in the OECD: from Reactive to Proactive, OECD, online at here  ). The timing of the accession, which took place in 2010, emphasizes the successful transition from a follower to one of the leaders in looking for the new frontier.

Partners in this quest, of course, includes Canada.

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