This report examines how EU’s ‘open strategic autonomy’ has been developed and realized facing recent changes in the global trade landscape, especially in areas such as supply chain, energy transition, immigration, and security integration. In response to the fragmentation and blocization of the global economy, which manifested in the US-China strategic competition, the COVID-19 pandemic, and the Russia-Ukraine war, the EU has sought to strengthen the competitiveness of its own high-tech and strategic industries and reduce its dependence on foreign countries (strategic autonomy). At the same time, it seeks to continue cooperation with like-minded countries with shared values and interests to address challenges that require global effort (openness).

 Chapter 2 defines open strategic autonomy in more detail and investigates how it has been implemented in the supply chain sector. The industrial and trade policies that have been published since the inauguration of the current EU Presidency in 2019 embody the concept of open strategic autonomy, which is defined as “strengthening competitiveness Executive Summary in the region to defend EU interests without relying on other countries, while continuing to cooperate with partners who share the values and interests.” After the Russia-Ukraine War, the EU continued its efforts to identify areas of weakness in the EU’s competitiveness and to localize and diversify its supply chains. This strategic shift was reflected in a series of supply chain legislation such as the European Chips Act, Critical Raw Materials Act, Net-Zero Industrial Act, and Corporate Sustainability Due Diligence Directive. The EU sets targets for the share of home-produced goods and provides various support measures such as subsidies, tax benefits, R&D investment, and workforce training. In addition, the legislation emphasizes bilateral and multilateral strategic partnerships, reflecting the open strategic autonomy of the region to continue cooperation with like-minded countries.

Chapter 3 investigates energy policies of the EU and EU Member States. The energy crisis brought on by the Russia-Ukraine war illustrated how overdependence on a single country can have a profound impact on the EU economy. In response to the energy crisis, the EU sought to phase out or suspend energy imports from Russia, diversify its energy import sources, increase the production of renewable energy, and promote energy efficiency. The energy policies of Germany, France, Finland, and Poland are then examined as case studies. Germany’s recent energy policy has been characterized by an increased use of renewable energy sources, the closure of all nuclear power plants, and an increase in hydropower generation. France, on the other hand, has maintained a high reliance on nuclear power, while persistently investing in renewable energy to achieve climate neutrality by 2050. Finland is a low-carbon country with a high share of renewable energy, and has been importing energy from neighboring countries such as Norway and Estonia after the outbreak of the Russia-Ukraine war. Poland is the most fossil fuel-dependent country in the EU, and as such, it is expected to face the Executive Summary • 259 most difficulties in implementing EU-wide green transition policies. Therefore, Poland aims to overcome this limitation by starting a nuclear power project. It is common to all four countries that they are trying to expand renewable energy while developing alternative energy sources such as nuclear and hydrogen power. Increasing energy independence through the development of alternative energy sources is expected to increase the EU’s strategic autonomy in the energy sector.

 Chapter 4 analyzes the trend of Ukrainian refugee influx to European countries and their impact on the labor markets, through literature review, fieldwork and statistical analysis. Immediately after the outbreak of the Russia-Ukraine war, there was a large influx of Ukrainian refugees to European countries, and EU member states actively accepted refugees by invoking the Temporary Protection Directive. The refugee influx to Europe is characterized by a high proportion of women and children and a high number of highly educated and skilled workers. The empirical analysis in this chapter, using microdata from UNHCR, shows that access to language training is significantly and positively associated with a refugee’s probability of employment. While the impact of refugee flows on the labor markets of host countries still needs further studies, an increase in the labor force with no significant impact on labor market conditions is observed so far. While Europe has been welcoming Ukrainian refugees, it showed a very different attitude towards migrants and refugees from the Middle East and North Africa, including Syria. This could be explained by an attempt to overcome the security threats posed by the war through solidarity with Ukraine, a country with a similar position. This illustrates one aspect of the EU’s tendency to selectively accept migrants and refugees to defend its interests and provides evidence that the EU’s commitment to open strategic autonomy is also observed in the area of immigrant acceptance.

Chapter 5 focuses on the changing concept of strategic autonomy in the EU’s security sector after the war. While the need to strengthen the EU’s defense capabilities in response to the immediate security threats of war has intensified, Europe’s strategic autonomy has remained an elusive goal, even as its security dependence on the United States has increased dramatically. The accession of traditionally neutral countries such as Sweden and Finland to the US-led NATO alliance signals a growing preference for increased US-dependent defense capabilities. However, the EU has pursued a strategy of strengthening its own security and defense capabilities independent of NATO. The provision of arms and munitions to Ukraine and the implementation of training missions to Ukraine’s armed forces are examples of such moves. The EU’s efforts to establish a common market for defence procurement have also been partially realized with the passage of the European Defence Industry Reinforcement through Common Procurement Act. The EU’s strategic autonomy in the security field will be determined by its progress in establishing relations with the United States and NATO, building a regional defence industry ecosystem, supporting Ukraine’s post-war defence build-up, and security cooperation with Indo-Pacific countries.

Chapter 6 presents policy implications for Korea based on the above findings. The EU’s expanding support for local industrial competitiveness is likely to pose challenges for Korean exporters, but there are also opportunities for Korea to take advantage of this. European Chips Act, Critical Raw Materials Act, Net-Zero Industrial Act are all concerned about expanding bilateral and multilateral cooperation with trusted partners. In addition, the EU’s recent supply chain legislation is characterized by weak geographical discrimination, so it is expected that Korean companies with a local presence will be able to enjoy similar benefits as EU companies. Taking advantage of the EU’s favorable aspects of its foreign and economic policies will not only benefit our companies, Executive Summary • 261 but will also allow us to make a joint contribution to addressing global challenges that require international cooperation, such as the reshaping of the international order, supply chain pressures, climate change response, and labor supply shortages. To this end, Chapter 6 identifies areas where we can expand our cooperation with the EU in the energy, immigration and security sectors. Finally, the challenges of the changing global trading environment faced by the EU are the same challenges faced by Korea, and we need to learn from the EU’s responses and use them to develop strategies tailored to our own circumstances. While it is beyond the scope of this report to formulate a specific foreign economic and economic security strategy for Korea, the EU case analyzed in this report is expected to serve as an important reference point.

Digital transformation represents a paradigm shift that covers every facet of corporate management, including production, development, ordering, customer management, and business strategy. Rooted in digital technology, this transformative shift has become essential for corporate survival, fostering industrial competitiveness, elevating the quality of life, and contributing to national development. While the attention on digital transformation has escalated recently with the rapid integration of fourth industrial technologies such as the Internet of Things, 3D printing, cloud computing, big data, and artificial intelligence, its essence is deeply related to long-term processes like process automation and the evolution of information and communication technologies (ICT). This study investigates global and industry-specific trends in digital transformation, examining its correlation with the labor market in the United States, Germany, and Korea, and analyzing pertinent labor market policies.

In Chapter 2, the study examines various definitions of digital transformation from previous research and measures and compares the digital transformation of industries in major countries using indicators such as ICT capital stock, ICT intermediate input, and robot capital stock. The analysis of data from 2000 to 2017 indicates a significant increase in digital transformation in most of the 16 countries studied. While Korea maintained a top position in ICT equipment capital stock and intermediate spending from 2000 to 2017, software concentration and intermediate spending remained in the mid-range. Particularly, Korea’s robot concentration in manufacturing increased significantly, making it the country with the highest robot concentration among the 16 nations.

Despite Korea’s prowess in traditional digital transformation, its adoption of digital technologies (Internet of Things, 3D printing, cloud computing, big data analysis, and artificial intelligence) between 2018 and 2021 lags behind the OECD average, particularly in artificial intelligence. This analysis underscores Korea’s dominance in conventional digital transformation but reveals a deficit in adoption of cutting-edge technologies.

Chapter 3 delves into the intricate relationship between industryspecific digital transformation and employment dynamics in the U.S., Germany, and Korea. The analysis unveils diverse correlations between digital transformation variables and employment across countries. Notably, South Korea experiences a unique scenario where the positive and negative effects of digital transformation are concentrated among high-skilled workers, distinguishing it from the polarization observed in the U.S. and Germany.

Chapter 4 examines global policy responses to the transformative impact of digital transformation on the labor market. Categorizing policies into employment, education, and social security domains, the study emphasizes the need for adaptive measures to address the evolving employment landscape. Noteworthy examples include the introduction of minimum wage systems and collective bargaining rights for platform workers in response to the changing nature of employment.

Drawing upon the cumulative insights from Chapters 2 through 4, Chapter 5 provides key implications of this study. It supports for a shift in Korea’s digital transformation focus towards the service industry and underscores the importance of tailored policies for small and medium enterprises (SMEs) to bridge the technology adoption gap. The analysis of the labor market highlights the imperative of upskilling and reskilling programs to mitigate the impact on low- and medium-skilled workers.

In conclusion, the study underscores the multidimensional nature of digital transformation, ranging from its historical trends to its intricate relationship with the labor market and the evolving policy landscape. As countries navigate the challenges and opportunities presented by digital transformation, adaptive policies and a holistic approach are essential to ensure a balanced and inclusive transition in the workforce. 

Since the 2008 global financial crisis, Korea's external financial sector has undergone significant structural changes. Korea's net international investment position (IIP), the difference between external financial assets and liabilities, achieved a surplus in 2014 for the first time in its history. In 2018, the net IIP, excluding foreign exchange reserves, also turned into a surplus and has steadily expanded since then. This structural shift has broader implications beyond numerical values. It can impact financial stability and the pursuit of financial internationalization policies, which have traditionally been challenging to reconcile in Korea. Therefore, this study analyzes the influence of net IIP on financial market stability, economic volatility, and financial internationalization. It also examines financial internationalization procedures in the cases of Germany and Japan. Based on these analyses, this study aims to provide policy implications that can enhance Korea's economic stability and strengthen its financial internationalization capabilities.

This study consists of six chapters, excluding the introduction. Chapter 2 examines the trends in Korea's International Investment Position (IIP) and compares them internationally to identify the characteristics of Korea's IIP. When we break down Korea's net IIP into sub-categories, foreign direct investment and other investment turned into surpluses in the early 2010s, and equity portfolio investment also turned into surpluses in 2022. This shift was driven by several external factors in the Korean economy, such as the persistent current account surplus, the expansions of foreign direct investment by companies since 2000, the expansions of bank lendings to Korean overseas subsidiaries, the rapid growth of overseas investments by the general government (notably, the national pension fund) since the global financial crisis in 2008, and the elaboration of overseas investments by securities companies, insurance companies, and individuals. In addition to these observations, several characteristics can be drawn from international comparisons. Firstly, there are only a few countries that have a surplus in their net IIP. As of 2022, only 15 out of 46 major countries have net IIP surpluses, with Korea ranking 11th in net IIP (as a percentage of its GDP). Secondly, most of these surpluses have been achieved recently, since 2010. In case of Korea, its net IIP (excluding foreign exchange reserves) turned positive in 2018, somewhat later than other countries. Lastly, it is important to note that countries that have moved from a deficit to a surplus, including the case of Korea, have generally remained in surplus for the most part. This implies that the shift to a net IIP surplus represents a structural change rather than a temporary one.

In Chapter 3, we investigate the relationship between a country's status as a net creditor and the stability of financial markets, specifically focusing on episodes of sudden capital inflows and outflows. We measured surge, stop, flight, and retrenchment in accordance with the definitions provided by Forbes and Warnock (2012) for the four distinct episodes of sudden capital inflow and outflow. Our empirical analysis comprises a dataset of 66 countries, covering the period from the first quarter of 2001 to the fourth quarter of 2020. The analysis revealed that the variable of interest in Chapter 3, whether a country is a net creditor, is closely associated with the retrenchment episode among the identified episodes. If a net creditor country experiences a stop episode, the probability of retrenchment occurring in the following period increases. In other words, net creditor countries act as a buffer, preventing a deterioration in external soundness as foreign assets return to the home country in potential crisis situations. This suggests that Korea, a country still affected by the trauma of the currency crisis, has a market-friendly stabilization mechanism that can help mitigate the risk of potential currency crises.

In Chapter 4, we delve into the relationship between yields on external financial assets and liabilities and consumption growth to assess whether an international risk-sharing mechanism can diversify the risk of consumption fluctuations in domestic and foreign. Based on the consumption-based asset pricing theory, the relationship between external financial assets and liabilities and domestic and international economic fluctuations, measured by consumption, was examined in a three-stage model. The result reveals that the yields of external positions in emerging economies exhibit procyclical to the impact of global risks while counter-cyclical to domestic risks, indicating that emerging countries have international risk-sharing through their external financial assets and liabilities. On the other hand, the yields on external positions of advanced economies demonstrate independence from both global and domestic risks. We also find that the unexplained composition of these yields positively correlates with the size of net IIP and the level of economic and financial market developments. While external positions can mitigate idiosyncratic risk through international risk-sharing mechanisms while magnifying systemic global risk in emerging countries, advanced economies, including Korea, mitigate international risk-sharing through the interaction of their external balances and gain stable yields regardless of domestic and global fluctuations. Notably, the net IIP contributes additional returns on the net return on external financial assets and liabilities.

In Chapter 5, this study examines how net international investment position (IIP) impacts the international competitiveness of financial services, measured by the revealed comparative advantage of financial service exports (referred to as financial service RCA). The results of the fixed effect panel analysis reveal that external financial assets have a positive effect on the financial service RCA, and there is a significant difference in the impact's magnitude based on whether the period had a surplus or deficit in net IIP. Specifically, the positive relationship between external financial assets and financial service RCA is more pronounced during periods of net IIP surplus compared to net IIP deficit periods. Furthermore, we investigate the relationship between financial service RCA and subcomponents of external financial assets, such as direct investment, portfolio investment, and other investment. The empirical results show that portfolio investment has a positive effect on financial service RCA during net IIP surplus periods, while other investments have a positive effect on financial service RCA during net IIP deficit periods. This may be attributed to the shift in global fund flows from other investments to portfolio investments in the aftermath of the 2008 global financial crisis when the frequency of net IIP surpluses significantly increased. As for direct investment, no statistically significant linkage to financial service RCA was found.

Chapter 6 examines Germany and Japan's financial internationalization cases and compares them with Korea to identify commonalities and differences. Germany and Japan, like Korea, have a surplus in net IIP and a significant presence in manufacturing industries. However, they exhibit higher levels of financial internationalization and financial competitiveness than Korea. Regarding the degree of financial internationalization, Japanese financial companies have the highest proportion of overseas assets among the three countries, followed by Germany, with Korea having the lowest. While Germany and Japan have expanded their international presence both before and after the Plaza Accord in 1985, Korea briefly expanded its financial internationalization in the early 2000s due to the Northeast Asian financial hub and overseas investment activation policy, but this growth waned significantly during the 2008 global financial crisis. Since the early 2010s, Korea has gradually expanded into emerging markets such as ASEAN. In terms of their approach to internationalization, all three countries primarily follow a banking-centered model in response to foreign customer demands, with a preference for independent overseas subsidiaries and branches over M&A. However, Japan has increasingly expanded into the non-banking sector since the 2010s, actively targeting local customers and engaging in M&A. Another key difference lies in the direction of outbound financial internationalization policy. Germany's internationalization is primarily market-driven, mainly thanks to the peculiarities of the EU system, whereas, in Japan, government policies have played a more significant role. Korea's approach is more similar to Japan's than Germany's.

Chapter 7 provides the study's conclusions and policy implications. In summary, the surplus in net IIP was found to significantly contribute to both economic stability, including financial market stability, and the enhancement of international competitiveness in financial services. This surplus represents a crucial structural change with implications for both economic stability and financial service internationalization. Several policy implications can be derived from the results of this study. First, Korean policy authorities have an opportunity to promote both financial stability and financial internationalization simultaneously. Second, it's important to review the macroprudential measures for capital flows introduced during periods of net IIP deficits, as the private sector's role in financial stability has evolved due to changes in the net IIP surplus structure. Additionally, there's a need to improve regulations and create an environment that fosters financial internationalization. This involves enhancing regulations on financial companies' overseas expansion and businesses and expanding financial cooperation with emerging countries. Finally, for financial stability, adherence to international norms like Basel III is essential, rather than relying on macroprudential measures for capital flows. Finally, the government's approach to financial stability needs to be changed to faithfully implement international norms such as Basel III rather than focusing on regulating capital inflows and outflows. 

With the geopolitical and geoeconomic importance of the Indo-Pacific region in the spotlight, India’s strategic value has come to the fore, and its eventual positioning in the G3 is more likely than ever. The United States and other like-minded countries are committed to building diplomatic, military, and economic ties with India. In response, India is more actively pursuing strategic autonomy. While increasingly estranged from China and relatively close to the United States, India is clearly seeking to minimize its dependence on any one country and maximize its autonomy to consider its own interests and make alliances on a case-by-case basis. This is true in the economic sphere as well as in foreign and security affairs. Therefore, it is important to understand the nature of the issue and India’s unique position and needs on it. For example, while India has some cooperation with China in the Asian Infrastructure Investment Bank and the Shanghai Cooperation Organization, it opposes the Belt and Road Initiative. Meanwhile, it continues to engage in military and economic exchanges with Russia, despite the cold shoulder from the US and other Western countries.

Major players in the international community, such as the United States and Japan, have significantly strengthened their strategic economic cooperation with India in recent years, especially as they have begun to reshape their global supply chains. While complete decoupling from China is unlikely at least in the short term, it is clear that India is emerging as an alternative partner in the new Asia (Altasia). With a growing network of strategic, economic, and technological partnerships already centred on India, there is every likelihood that India will become a major player in global supply chains in the medium to long term. South Korea seems to have started to ride this wave. By adopting Korea’s Indo-Pacific Strategy to strengthen its role as a ‘global pivot’, the South Korean government has created an opportunity to share its strategic vision with India. It should develop the bilateral relationship into one of close strategic solidarity and cooperation, and adjust its approach to India.

India, which has recently taken the lead in global cooperation by hosting the Global South Summit and the 2023 G20 Summit, should be recognized as an important anchor partner in the Indian Ocean and South Asia. India’s close ties with key countries in the Indian Ocean, the Middle East, Africa and Europe, and its leadership role in several multilateral organisations, can serve as an important bridgehead for expanding Korea’s regional cooperation and economic security networks. To this end, it is important to formulate Korea’s India policy from a medium- to long-term perspective rather than seeking immediate results.

The growing strategic rivalry between the United States and China has led to a visible geopolitical and technological competition that is clearly changing the face of economic cooperation with India. Trade, value chain resilience, clean energy and climate change, and digital are some of the areas where the strategic environment is changing and where major countries’ bilateral cooperation with India is noticeably changing or strengthening. These are areas where India’s internal drivers and needs align with the strategic and economic considerations of major countries, and where the value of cooperation with India is rapidly increasing, making them a priority area to explore.

Traditional forms of trade policy, including free trade agreements (FTAs), have entered a new phase in light of India’s rising strategic importance, its market potential to replace China, and the trend towards de-risking of value chains centered on high technology. While India’s trade policy towards major economies has moved beyond or expanded beyond traditional areas and modalities, new trade deals are being actively negotiated for market and industry linkages with India. India is responding by leveraging its rising status to strengthen its industries and export competitiveness.  

Value chain resilience is an area where India is very active in outreach. There are two main streams of cooperation: the high-tech-oriented cooperation with India by the US and the EU, with a view to decoupling from China, and the broader industrial cooperation promoted by Japan. There is also cooperation through (sub-)multilateral organisations. India has been very receptive to projects that can help foster domestic manufacturing, and has shown a favourable attitude towards foreign investment.

Clean energy and climate change is an area where India is very active in external cooperation. As a net importer of crude oil, India needs to reduce its dependence on external energy sources while maintaining high economic growth. In addition, India, and South Asia as a whole, is facing an urgent energy transition needs due to severe air pollution and vulnerability to climate change, which will require large investments. In this context, India has a high potential for the development of renewable energy such as solar and wind power. From the perspective of partner countries like the U S, bilateral cooperation on clean energy and climate change is a key area where they can derive benefits from India’s immediate needs. It is also important in terms of supporting India build a foundation for stable growth while mitigating foreign and security strategic risks by reducing India’s external energy dependence.

The digital sector is a promising area for collaboration with India, given the U.S.-China conflict and India’s growing market. From telecommunications equipment to artificial intelligence, quantum computing, and legal systems such as digital trade norms, the U.S.-China conflict is at its peak, and the Indian government has recently put the brakes on Chinese investment in India. In addition, India has a growing digital economy and excellent innovation capabilities, including in artificial intelligence. Moreover, India faces problems in terms of the quality and security of its overall digital infrastructure, so there is a high potential for external cooperation, including development cooperation. However, there is still a major constraint in India, which seems to be that the institutional foundation is not yet been fully formed. Currently, the legal system that regulates platform markets such as e-commerce and personal information protection laws is being established in India.

India participates in major (sub)multilateral organisations such as Quad, IPEF (Indo-Pacific Economic Framework), SCRI(Supply Chain Resilience Initiative), MSP(Minerals Security Partnership), ISA(International Solar Alliance), CDRI(Coalition for Disaster Resilient Infrastructure), etc. In addition, India also participates in the SCO (Shanghai Cooperation Organization), the BRICS, and other partnerships involving China and Russia, and plays a leading role in South Asian regional partnerships such as BIMSTEC(Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation). India seems to be a selective and partial contributor, focusing on getting the best out of cooperation in its own interests. However, in its own leading initiatives, such as on clean energy and climate change, it is seeking to strengthen its position as a developing country leader and thus pave the way for a move to the G3.

South Korea should strategically strengthen its cooperation with India to avoid being left behind in the reshaping of the international economic order. Cooperation with India in high tech, supply chain, and digital fields is increasingly necessary; with the reorganisation of global supply chains, India will play a significant role in enhancing Korea’s economic security. Strengthening economic cooperation with India will help reduce Korea’s economic dependence on China and increase its strategic autonomy from China.

It is also important to expand contacts with India based on various economic cooperation platforms. South Korea and India have opportunities for cooperation in the Indo-Pacific Economic Framework (IPEF), among others. Both countries should further strengthen and expand bilateral cooperation in areas such as supply chain and clean energy in the IPEF. Above all, Korea should actively seek opportunities to participate in the various high-tech cooperation and global connectivity infrastructure cooperation centering on India, and should not hesitate to promote an economic and security cooperation network involving India and other partner countries if necessary.

Reciprocal diversification of Korea’s economic partnership with India, with a focus on manufacturing, is an important task. India is rapidly becoming a partner for supply chain de-risking, which is very different from the past trend and should be considered by Korea. The biggest challenge for the Indian economy right now is to develop its manufacturing sector, and Korea is a key partner. The industries in which Korea has a competitive edge, such as shipbuilding, automobiles, electronics, semiconductors, and next-generation telecommunications, are almost identical to the sectors that India is strategically promoting. In addition, exploring various areas of cooperation beyond manufacturing is crucial to advancing bilateral economic cooperation. India has a variety of challenges other than fostering manufacturing, and has many demands for external cooperation. Moreover, from Korea’s perspective, India has strong competitiveness in areas such as ICT, aerospace, and artificial intelligence, and can help Korea advance its economy in the face of US-China competition.

The authors suggest the following key agenda for Korea-India bilateral cooperation. First, concluding negotiations to improve the Korea-India CEPA is important for revitalising the two countries’ flagship economic cooperation platform. The Korea-India CEPA has played a key role in strengthening bilateral economic ties and even diplomatic relations. However, the effectiveness of the Korea-India CEPA in increasing bilateral trade and investment is not satisfactory. Bilateral merchandise trade has grown at an average annual rate of 4.1 percent since 2010, when the Korea-India CEPA took effect, with Korea’s exports to India growing at an average annual rate of 4.3 percent and India’s exports to Korea at 3.8 per cent. Compared to trade, India’s investment in South Korea has been even slower, with India being South Korea’s 20th largest investment destination, with cumulative investment totaling $5.74 billion over the period 2010-22. This is particularly true when compared to Korea’s two largest emerging markets and production bases, China and Vietnam.

The key to reaching a deal to improve the Korea-India CEPA will be to reduce non-tariff barriers such as TBT and SPS, improve customs procedures, and further reduce tariffs. In addition, it will be important to identify cooperative initiatives that can decrease bilateral trade imbalances. For example, the Korea-India Joint Initiative should be launched to support trade and investment activities of companies from both countries, and a Korea-India Cooperation Fund should be introduced to provide financial support for identifying bilateral cooperation projects, research, and business matchmaking projects.

Second, cooperation on value chain resilience is an area where India’s external cooperation is flourishing in the face of US-China competition and will be at the core of Korea-India economic cooperation. Semiconductors, electronics, automotives (including electric vehicles), batteries, aerospace, and defense are all areas with high potential for bilateral cooperation. To this end, the two governments should consider establishing a high-level (ministerial) India-South Korea trade policy dialogue channel, or a high-tech partnership. It would be effective to support the entry of Korean manufacturing companies into India through the creation of industrial parks. The key to success of them is to ensure the possibility of collaboration between leading companies and their partners, while ensuring sufficient government-to-government dialogue with the Indian union and state governments.

Third, Given India’s strong commitment to and needs for climate change mitigation and energy transition, the high growth potential of Indian market, and the need for carbon reduction and energy security in Korea’s energy transition, cooperation with India on climate change mitigation and energy is of great importance. Currently, there is a lack of regular dialogue between the two countries in the energy sector. As a priority, launching the Korea-India Energy Dialogue and the Korea-India Climate Change Cooperation Agreement is required. The Korean government is promoting EDCF(Economic Development Cooperation Fund) Framework Agreement with India, and it is necessary to set climate change and energy as the focus areas.

Fourth, India’s role and potential in the digital sector has come under the spotlight in the context of the US-China competition. Priority for cooperation in the digital sector would be artificial intelligence, cybersecurity, and the digitalization of public services. A separate channel for cooperation in the digital sector (possibly called the Korea-India Digital Partnership) should be established to identify bilateral cooperation needs and discuss institutional trends such as trade norms, or it should be reflected in the above-mentioned channel for high-level trade policy dialogue between Korea and India.

Fifth, South Korea has designated India as a priority ODA partner in 2022 and is in the process of signing the EDCF Framework Agreement. Cooperation in infrastructure development is one of the most underdeveloped areas of Korea-India cooperation. As mentioned before, energy and climate change, along with infrastructure, are areas where India’s immediate needs are concentrated. Moreover, Korea’s experience in developing from the poorest to the advanced countries is highly regarded and constitutes a major part of the Korea’s image in India. In this sense, Korea’s KSP(Knowledge Sharing Program) projects will be effective in delivering Korea’s development experience to India in various fields.

Sixth, improving mutual understanding between Korea and India is a critical task. The average Indian’s knowledge and understanding of Korea is not high, and this affects bilateral relations. Korea’s Indo-Pacific Strategy’s mission to “promote mutual understanding and exchange” should be a key focus in deepening ties with India. The Korean Cultural Centre in Delhi should be expanded to other major cities such as Chennai, and given the popularity of K-pop and K-drama in India, support for local exhibition and marketing projects involving Korean products should be strengthened. In the case of K-beauty, which is gaining popularity in India, synergies can be achieved by linking it with other Hallyu products. In addition, people-to-people exchanges, including students, between the two countries should be expanded. As interest in Korea is growing in India due to the popularity of the Hallyu and the official adoption of Korean as a second language, people-to-people exchanges at this moment will be crucial for strengthening the future relationship between the two countries.

Seventh, South Korea should seek to cooperate with India in (sub)multilateral organisations. India is likely to be more willing to cooperate internationally on issues such as supply chains, climate change and energy, etc. and there are many areas where South Korea can align itself with India’s position. South Korea should also consider participating in the India-led ISA and CDRI. Working with India on agendas to assist developing countries would be an effective way to improve bilateral relations. 

This study began with the idea that the international community’s discourse on China may not be produced, distributed, and utilized separately in each country, but may be formed within a huge global network. So this study tried to examine what the content of the discourse on China is; who produces it; how it is being distributed and utilized in the international community. And it also tries to examine the political dynamics under which the international community’s discourse on China is produced.

This study first selected the issues of the 2019–2020 Hong Kong protests, the Belt and Road Initiative (BRI), and the COVID-19 pandemic and conducted a case analysis of the international community’s discourse on China, focusing on these issues. As a result, many interesting facts were discovered. In particular, it was found that political images of the BRI seemed to have a stronger influence than direct experience toward it in shaping the international community’s discourse on the BRI.

Through the analysis of three cases, it was possible to identify countries, regions, and organizations that play an important role in shaping the international community’s discourse on China. Among countries or regions, the United States and the United Kingdom appeared to be the most prominent actors in shaping the international community’s discourse on China. In addition, Japan and Taiwan, which are China’s neighbors and have a tense relationship with China in establishing order in the Asian region at the same time, also emerged as important actors. Accordingly, this study analyzed in more depth the mechanisms of how the discourse on China is being formed within the relevant countries and regions, targeting the US, EU (UK), Taiwan, and Japan. At the same time, it also analyzes the formation of the discourse on China in Korea, along with ASEAN, which is becoming increasingly important geopolitically, as can be seen from the U.S. “Free and Open Indo-Pacific” (FOIP) Strategy and China’s BRI.

First of all, it is not an exaggeration to say that the current perception of China in Korea is the worst. perceptions of China are poor in both progressive and conservative camps, and anti-China public opinion is overwhelming in all age groups. In particular, anti-China sentiment among young people is so strong that it is a unique phenomenon in the world.

However, there is an important feature in Korea’s perception of China that is consistent with the U.S. perception of China. Looking at the overall structure and flow of the Korean perception of China, there is a strong factor that does not change, a phenomenon that is closely related to the U.S. perception of China. It is no coincidence that the perception of China has structurally deteriorated in Korean society since the U.S.-China strategic competition began in earnest.

Second, the discourse on China in the U.S. is so numerous and vast in type and quantity that it is almost impossible to figure out what content is being produced, distributed, and used by whom. Nevertheless, it was possible to capture the general outline by using Laswell’s SMCRE (Sender, Message, Channel, Receiver, Effect) model, a communication model.

First, it is analyzed that the main actors or producers of discourse (S) are current and former government officials, influential politicians in the National Assembly, and influential think tanks. And a variety of discourses on China are being produced by these people, and the most notable change recently is the rapid spread of ‘anti-China’ (M) discourse. The main reasons for their opposition to China include human rights violationsabuse, authoritarianism, coercive diplomacy, expansionism, and propaganda.

Meanwhile, the channels through which these discourses on China are disseminated are very diverse, including books, articles, reports, news, hearings, speeches, dramas, movies, and documentaries (C). In particular, specialized books related to China are produced and distributed in large quantities, it can be interpreted as U.S. society’s considerable knowledge production capacity being used to shape anti-China discourse. And the context of U.S. society’s discourse on China can be summarized as “China’s growth and the resulting sense of crisis.” As China rapidly grows economically and expands its international influence, the Liberal International Order (LIO) established by the U.S. will be shaken, and there is a sense of crisis that it may lose vested rights of U.S.. Therefore, from the U.S. point of view, it is necessary to reveal the true nature of China, strengthen vigilance against China, and unite the international community with the liberal democracy camp (E). Those who will be made to agree to this include not only domestic Americans but also the entire international community (R). One of the important featurescharacteristics is that the U.S. government is involved in each element of the SMCRE as a major player in shaping the discourse on China in U.S. society.

Meanwhile, the discourse on China in European society can be examined through the relationship between Europe and China. Until 2010, Europe and China maintained a relationship of mutual growth through learning and teaching from each other. At that time, it was emphasized that Europe viewed China as a large, underdeveloped country and an important trading partner. However, around 2010, when the U.S. began to seriously control China, Europe’s perception and strategy toward China also changed, and this also influenced the formation of discourse on China in European society. Against this background, Europe adjusted its strategy to keep China in check while maintaining the principle of cooperation with China. However, compared with the U.S., the discourse on China in Europe does not have many discourse producers who are extremely opposed to China, the messages ont China are diverse, and the perception of China is different for each EU member country.

In the ASEAN region’s discourse on China, China’s construction of artificial islands in the South China Sea and various measures to secure energy resources have created a crucial opportunity for ASEAN countries to form a hostile security discourse against China. However, ASEAN countries cannot simply discuss China as a ‘security threat’ and ‘expansionist’ because of the South China Sea dispute. This is because their economies and infrastructure are heavily dependent on China. For ASEAN countries, where trade with China and infrastructure investment from China are essential for economic growth, China cannot help but be discussed as a major ‘economic cooperation partner and opportunity’, which makes the formation of discourse on China in ASEAN countries multi-layered and complex. Meanwhile, the discourse of ‘debt trap’ an ‘neocolonialism’ have formed and spread in relation to China’s economic diplomacy, including the BRI, as Sri Lanka failed to repay its BRI-related debts in 2017.

Meanwhile, the discourse on China in Thailand is more dynamic and interesting. The family discourse such as ‘Thailand and China are brothers’ has the longest history and is most frequently used in the Thailand’s discourse on China. And in the economic field, China has been mainly discussed as a ‘partner’ and ‘opportunity’ for the Thai economy, and the formation and circulation of this discourse began in earnest with the rise of the BRI in 2014. However, the mainstream pro-China discourse that have portrayed China as a brother and economic partner has faced great resistance due to the formation and rise of a counter-discourse that has begun in earnest since 2019. It can be said that China’s expansion into the South China Sea that began in 2014, the Mekong River dispute with China that began in 2019, the controversy over the Chinese ‘water vaccine’ amid the spread of COVID-19 in 2020, and the anti-government democratization protests from 2020 to 2021 are the backdrop. Through this series of events, China began to be discussed in Thai society as an ‘unreliable selfish hegemonic state’ and an ‘authoritarian dictatorship’ rather than as a ‘brother and family’ or an ‘economic partner and opportunity’. What is especially noteworthy is that anti-government forces in Thailand, pro-democracy forces in Hong Kong, and pro-independence forces in Taiwan, who share anti-China sentiments, are working together to lead anti-China public opinion, forming the so-called ‘Milk Tea Alliance’. 

At present, public opinion toward China in Taiwan is largely divided into a pro-China line that values cooperation with mainland China and an anti-China line that is suspicious of or opposed to mainland China. The Democratic Progressive Party (民主進步黨) leads the anti-China line, emphasizing Taiwan’s independent identity. On the other hand, the Kuomintang (中國國民黨) is seen as the leading pro-China force, inheriting the ‘92 consensus’ and emphasizing cooperation with mainland China. The Taiwanese people’s perception of China, which has an important influence on the formation of discourse, is revealed through their stance on independence and unification and their perception of identity. At present, Taiwanese people believe that it is better to maintain the current ambiguous situation rather than extreme independence or unification. In addition the large-scale anti-China protests in Hong Kong in 2019 have had a significant impact on strengthening the anti-China sentiment among Taiwanese people, according to the analysis.

Meanwhile, it is assessed that the discourse on China in Japan has basically followed a similar trajectory to the change in Sino-Japanese relations. In particular, since the mid-2000s, the two countries have entered a period of strategic confrontation, and as the rapid growth of China’s economy contrasts with Japan’s economic situation which is described as the ‘lost 30 years’, Japanese society’s sense of loss has turned into a sense of caustion toward China. And this has had a negative impact on the formation of Japanese society’s discourse on China. In addition, the dispute between the two countries over the Senkaku Islands (Diaoyu Islands) in 2010 and 2012 had a decisive impact on the qualitative changes in the discourse on China in Japan.

It is interesting to note that the discourse on China in the two regions is closely linked. Japan and Taiwan have established a friendly and highly trusting relationship in all aspects of society, and are engaged in active exchanges and cooperation at various levels, including political, economic, academic, and cultural circles. And in the process of these exchanges, it seems that information and perceptions about China are being shared and a common discourse on China is being formed.

The results of the analysis give us the following implications.

First, the international community’s discourse on China reflects changes in the international order. The discourse on China reflects changes in China itself, but it also reflects changes in the international order surrounding China. Therefore, we need to accept the discourse on China with a more cautious and critical attitude, considering that it may reflect changes in the current international order. There is a need to look more seriously at the context of who shape the international community’s discourse on China why and how.

Second, we need to soberly evaluate and utilize the discourse on China produced and disseminated by the global media in a cool manner. We need to consume media coverage of the international community related to China while being aware that it may reflect the logic of national interests. Otherwise, our perception and attitude toward China may be influenced by the ‘national interests’ of other countries, which may be hidden behind the authority of the ‘influential global media’.

Third, many reports and research activities produced by leading U.S. think tanks have had a significant impact on the international community’s discourse on China. As the strategic competition between the U.S. and China intensifies, research on China is becoming more active in the U.S., while in Korea, the environment for research on China is deteriorating as Korea-China relations become somewhat estranged. Research on China is necessary not only to strengthen cooperation with China, but also to effectively respond to China’s rise. 

The service industry has the largest share in India’s domestic production. While the Modi government has pursued various policies to grow the manufacturing sector, the role of services industry in the Indian economy still continues. IT sector has been one of the important sources for India’s service sector, but now software, internet services, and e-commerce have emerged as important sectors in India. This means that the services industry in India is undergoing structural changes in recent years. Responding to these structural shifts, many countries start to collaborate with Indian service sector. Yet, the cooperation between South Korea and India is mainly limited to the manufacturing sector. This research on India’s services industry aims to delve deeply into India’s ongoing industrial structural changes and related policies, analyze the changing demands within India’s service sector, and suggest a new direction for South Korea-India collaboration focused on manufacturing.

Based on quantitative and qualitative data analysis of India’s services industry, it is evident that a diverse range of service industries are emerging in India beyond the IT and software sectors. The productivity of Indian service firms and the share of skilled labor are increasing, and there’s a notable structural shift with a significant expansion in the opening up of the service sector to foreign direct investment. India’s service sector generates the most added value within the country, and its job creation is growing significantly compared to other industries. Additionally, there’s been an increase in exports, foreign direct investment, and integration with global supply chains. Traditionally, India’s services industry was dominated by retail and public services. More recently, however, corporate facility management and business support services, including R&D, equipment leasing, data management, and marketing, have emerged as key players. Financial and insurance services and educational services, are also on the rise. Indian domestic companies in retail, telecommunication services, transportation, cultural services, and financial services are experiencing an increase in their average total factor productivity, suggesting that various service domains within India are spearheading the growth of the country’s services industry. Additionally, the proportion of highly skilled workers in India’s service sector is steadily increasing.

At the heart of the growth in India’s services industry is the government’s policy of fostering technology-centric human resources and economic reform policies for the expansion of private sector participation and deregulation. Since its independence in 1947, the Indian government has consistently provided various support measures to cultivate technical workforce. Simultaneously, in 1991, the Indian government embarked on economic reforms centered on a market economy and subsequently opened up service trade and investment. Over time, the government has gradually expanded the scope of permissible FDI, and currently, it allows 100% FDI in most industries, barring a few such as insurance, distribution, and aviation industry. As a result of these measures, demand from abroad surged in the early 1990s to leverage India’s abundant and skilled IT workforce. This was followed by steady economic growth in India, and as individual incomes rose, diverse service industries such as law, accounting, and real estate flourished. Ongoing government support policies in the fields of telecommunications, IT, software, finance, and education continue to propel the growth of various service sectors in India. More recently, rapid growth of the manufacturing sector in India has led to an expansion in the demand for services, influencing the growth of India’s services industry.

However, amidst the structural changes in India’s services industry, South Korea’s integration into the Indian service market appears to be less than that of other major countries. The key external cooperation partners for India’s services industry are centered around the U.S., with other active players including European countries such as the U.K. and Germany, as well as China and Japan. The U.S. collaborates with India on visa facilitation to secure India’s outstanding technical workforce within its borders and is also operating programs for training Indian experts within the U.S. Japan is also cooperating to expand the use of Indian human resources and for Japanese companies to enter the Indian market. Japan, through its digital partnership with India, is promoting cooperation for digital transformation in both nations and supports employment of Indian IT professionals in Japan. In addition, they are strengthening financial technology exchanges and infrastructure cooperation through the Japan-India financial dialogues. Japan is also supporting the joint entry of service companies into India through the creation of industrial complexes. In particular, in Japan’s Neemrana Industrial Zone, various service sectors, including logistics, healthcare, telecommunications, postal services, finance, insurance, and retail, are actively operating alongside manufacturing companies.

In the past, cooperation between South Korea and India has focused primarily on manufacturing. Korean global companies in sectors such as electronics and automobiles are intensifying their expansion into the Indian market. However, in order to strengthen the relationship between South Korea and India, cooperation in various industries, including services, is essential. In particular, India’s service market is considered to have huge potential in terms of size and growth. With the opening up of various service sectors and improving conditions for cooperation, the need for Korea-India service cooperation is high. However, while South Korean investment and exports to India are expanding, the level of services industry cooperation lags behind that of other major cooperation partners. Specifically, in contrast to global investment, which tends to focus on service companies, South Korea’s investment in India’s services industry is characterized by a focus on manufacturing firms. These service investments in India tend to be sporadic and spread across different sectors each year. 

The main reason for the lack of cooperation in services between South Korea and India is the lack of information about the Indian market and the perceived risks involved in both the public and private sectors in South Korea. Useful details about India’s current market conditions, potential, challenges, and entry experiences are not effectively communicated to the Korean public sector or domestic private companies seeking to enter India, leading to heightened risk perceptions and stalled progress in cooperation. This problem has led to the current situation where there is little economic, diplomatic, and cultural familiarity between South Korea and India in both the public and private sectors. On the other hand, Korean companies that ventured into India were drawn by the potential and marketability of the Indian services industry. However, they commonly point to challenges such as differing regulations among Indian states, complicated establishment procedures, lack of highly competitive human resources, and recruitment difficulties due to low awareness of Korean companies in India.

To expand cooperation in the Korea-India services industry, this study emphasizes: ① strengthening the economic and diplomatic ties between South Korea and India at the government level, ② intensifying support for domestic private companies in India, ③ supporting policies that enhance linkages with local domestic manufacturing industries, and ④ the need to expand the exchange of human resources between South Korea and India, as well as encouraging domestic companies to utilize more Indian service personnel. To realize these objectives, this study proposes specific policy tasks such as △ establishing regular dialogue between South Korea and India at the government level, △ creating a Korea-India business support center, △ supporting entry by establishing Korean industrial complex in India, △ developing cooperative projects with public and private participation based on local Indian demand, and △ linking the ODA vocational training programs in India to the domestic labor market.