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World Economic Order and Economic Cooperation in the Middle East: Study on Seeking after the Economic Cooperation between Korea and the Middle East in the 21 Century

Ⅰ. Forward

The globalization in the international trade has been extended rapidly all over the world, demolishing geographical borders of the countries since 1990s. Rising above ideology and the border among countries, undiscriminative free trade is spreading under the influence of WTO system. The International labor market has been also greatly varied owing to the changing pattern of international division of labor. The international labor migration had proceeded from the low wage countries to the high wage countries before 1990s. The threatening power of the trade unions in the capitalist world is capable of overturning capitalist societies of wage-workers into societies of partners. For this reason, recently multinational companies seek another way to escape tariff barriers and to invest directly in the low wage countries in the form of joint-venture. This way is the second-best policy to raise the productivity and the revenues. Moreover, the world economic system faces new tripola system consisting of US, EU and Japan after the Gulf War. Because of this, new era which is co-existing with globalization and regionalism , and the mixed society between open market and trade barrier appeared in the world.

As you see, the Middle East has variety of races, languages, religions and geographies. It also contains more than 20 countries which are connected with three continents of Asia, Africa and Europe. In addition, the Middle East coexists with Christianity, Islam and Judaism as a cradle of religion. The Middle East also has large oil resources which is a major driving force in the modern industry.

Korea has emerged as one of the most successful NICs (Newly Industrializing Countries) and an inspiration to other developing countries. It has pursued consistently an Outward-Looking Foreign Trade Policy since 1962 and became the 12th largest trading country in the world. Korea also became the 29th member of OECD, the second Asian Country on October 11, 1996.

Korea's remarkable economic success is often cited as a model of sound economic planning, efficient resources allocation, and effective cooperation between the government and business enterprises. Now Korea witnesses radical changes of both domestic and world economic situations. Therefore, Korea must find a way to solve various problems besetting its economy, which range from high cost of wage and lagging technological innovation. On the international side, Korea faces uncertainties stemming from globalization and international environmental changes. Thus Korea's economic cooperation with resources rich countries is inevitably needed. The way how Korean human resources can harmonize with the natural resources of the Middle East will be the most important factor to cooperate two regions together as a favourable partner.

To examine the economic cooperation between Korea and the Middle East, my paper deals with the process of economic cooperation in the Middle East, economic cooperation organization in the Middle East, Middle East Regional Cooperation Program (MERC) and MENA (Middle East/North Africa) Economic Summit that are related with the Activities of the Economic Cooperation in the Middle East. Lastly I review the economic cooperation between Korea and the Middle East.

In this respect, this paper deals with the economic cooperatin of Korea and the Middle East under the new world economic order; Korean economy in the challenging and globalization era; and retrospect and prospect of economic cooperation between Korea and Middle East.

Ⅱ. World Economic Order and the Middle East

1. Changes of World Economic Order after the Gulf War

The present stage of world order after the end of the cold War displays no simple pattern. The United States is no longer hegemonic over the capitalist economy in the manner that it achieved in the 1940s, 1950s, and 1960s. But in some fields, particularly the military and the cultural, its dominance is greater in the 1990s than it has ever been. The collapse of Communism and the disintegration of alternative development strategies in the Third World has reunited the global political economy around the ideological principles of the United States. Meanwhile regionalism is in part a response to this situation. The United States, the European Union, and Japan might use the undoubted economic dominance that they enjoy in their regions to establish a political and security framework and a set of economic institutions which promote prosperity and development through trade, investment and aid. If such regionalist projects embrace open regionalism, they would still be compatible with the pursuit of policies at the global level through the G7 to stabilize the world economy and maintain economic growth(Andrew Gamble and Anthony Payne, 1996; 260-261).

Any way, the Gulf War may have marked the return of American unipower system, but it also demonstrated the need for the United States to exert its leadership as part of a coalition. The Gulf War was but one example of the types of threats the world will confront in the future. These issues will pose problems for the traditional pattern of U.S. hegemonic leadership, because they require collective leadership and policy coordination(Yoichi Funabashi, 1992; 68).

Although the Middle East crisis is a reminder that can't forget security issues, it is clear that the relative importance of security matters is dealing as compared with economic issues. The status of countries will be determined in the future much more by their economic capacities than by their military prowess. That dramatically enhances the role of Japan and an economically united Europe and sharply reduces the role of the Soviet Union. The other transformation is the change in the underlying economic capabilities that the payments at the time of the Gulf crisis also reflect. By the end of this decade, and maybe sooner, a truly Tripolar World Economic Structure will emerge, with  sharing of burdens and responsibilities among a Unified Europe (EU), Japan, and the United States. America will no longer dominate. A United Europe will become the world's largest market and biggest creditor nation and a leader in many key technology.  The Big Three of economics, therefore, will displace the Big Two of nuclear power(Challenge, 1990; 17). The most important thing is the appearance of the Bloc Economy that the Big Three ever had. European countries formed a single EU market, United States is now forming NAFTA with Canada and Mexico, and Japan, even though hard to organize it, is planning East Asia or Pacific Economic Community to cope with regional protectionism of the world trade. In the future, Regional Economy will play a great role in the world trade with the Big Three.

2. Middle Eastern Economic Order after the Israel-PLO Peace Talk

The Middle East has been faced with its new era in accordance with the Peace Talk of the Middle East. Israel and Palestinians that have maintained hostilely relation over 45 years signed the bilateral Palestinian autonomy plan on Sept. 13, 1993. Iraq's status was weakened in the Middle East due to the peace talk between Israel and PLO. The US could secure the hegemony that enabled her to manage the other Arab states in a better position. Except Iraq after the peace talk between Egypt and Israel in 1978, the Middle East had no real country that could act as a spokesman of Palestinians. The background of Iraq's survival was Iraq's will to be a spokesman of the Arabs against Arab-Israeli conflict. This situation provided to Iraq an opportunity that could be supported by Jordan, Yemen, Libya and PLO during the  Gulf War of 1991. On the contrary, the neighbour Arab countries, especially Egypt and GCC countries with the western allies turned away their face from PLO. PLO had suffered severely from economic difficulty with UN's economic sanctions against Iraq. This situation, however, was changed with the peace talk between Israel and PLO. In Palestinian issues, Egypt and Iraq are no longer direct partner to solve it, because PLO, an apple of discord of the Middle East, joined hands with Israel and got out of the reconciliation table directly. Iraq and Egypt had lost their specified duty as a spokesman of the Arabs and now are in the face of a new era for transformation that they can remain the leading nation among the Arabs(Seong Min Hong, 1994; 19-21).

In accordance with the Israel-PLO peace talk, economic order in the Middle East brought out various changes. After the Gulf War, PLO had been suffered from economic difficulties due to the UN' s economic sanctions against Iraq. PLO that is a key factor of the conflict in the Middle East selected Israel herself and turned her back to Iraq. Furthermore Israel is expecting to find new friends in the neighbour Arab countries.

These caused increased Iraq's isolation in the Middle East and the other side Israeli status rose. Iraq has been suffered from severe financial embarrassment aftermath economic sanctions. This prolonged situation caused that Iraq is eager to close her hand with US and try to solve the economic difficulties including economic rehabilitation. US was pressed with time table at the time of the Gulf war, however, Iraq is pressed with time table now. As for time affairs in the Middle East, US is in a better position rather than Iraq as time flies.   Current issues of the Middle East is the removal of economic sanctions against Iraq in the international oil market. But its removal depends on US attitude that act as a UN's spokesman. US, therefore, takes advantage of any current available means in the negotiations with Iraq.

Certainly Iraqi situation on September 3, 1996 brought out the changes in the Middle Eastern economic order. Iraq was waiting the expectation to remove UN's economic sanctions after the Gulf War. Really UN agreed to remove it on May 29, 1996. Finally the removal act was approved by UN on July 18, 1996. Under the hopeful conditions, US attacked Iraq on September 3, 1996 on account of Iraqi repressing to Kurds. This situation was different from the impacts of the last Gulf War. All the Arab countries including Egypt and GCC countries supported Iraq under banner of the non-intervention in the domestic affairs. Besides, Iran and Turkey joined in this trend. Iraq was regained its proud and the Arabs began to unite around Iraq. Thus the economic order of the Middle East is proceeding unclearly till now. Adding this situations, Palestinians and Israelis clashed in Jerusalem on September, 1996. The peace process in the Middle East was threatened by the worst fighting between Palestinians and Israelis in 30 years. At first the summit was to be held in Cairo. But Egyptian president Hosni Mubarak refused to be host unless Netanyahu agreed in advance to some substantive concessions. Washington meetings that Arafat, Netanyahu and king Hussein of Jordan had attended with Clinton was a scriptless meeting. Therefore the issues how to sole this situation is the greatest concerns and tasks in the new economic order in the Middle East.

Ⅲ.  Korea's Role in the Global Economy

1. Challenging of Korean Economy in the World Economic System

The most challenging task that the Korean economy faces today is how to overcome the protectionism and economic regionalism that is now prevalent in the world economy. In this regard, the new Korean government puts much emphasis on establishing a basic orientation for foreign trade policies to correspond to ever changing international conditions. In the case of the Korean economy, which has a high degree of dependency on foreign transactions, it is almost impossible to separate domestic policy and foreign trade policy because these policies are so closely interrelated. Therefore, the direction that the international economic order takes, which is strongly influenced by the three economic superpowers, the U.S., Japan, and the European Union, will have a great deal of influence on the Korean Economy(The IPE program, 1995; 51).

Prof. Cae-One Kim urges that Korea's interest in the tripolar economic system led by the US, Japan and  EU as follows. First of all, this system playes a major role in almost all areas of the world and Korean economy: from trade and capital movement, to finance and technology cooperation. Therefore, it is obvious that Korea's relationship within this system will have a great impact on its economic development. In Korea's experience, each economic bloc shows some different and unique characteristics in its relationship with Korea. For example, the U.S. is Korea's biggest trade partner, especially in export, but Japan is the country from which Korea imports the most. The EU, despite its important role in international trade, accounts for a very small portion of Korea's Trade. On the other hand, the U.S. and EU play a major role in the areas of capital and financial cooperation, and Japan in the area of technology cooperation(ibid.; 53-54). We can see at Table 2-1. that Korean trade has a high degree of dependency on the exports to U.S. and the imports to Japan.

The major actors are the three economic super powers. Their arbitrary and unilateral foreign economic policies sometimes cause confusion in the world economy and have a significant impact on Korea's foreign trade. Because Korea is heavily dependent on the U.S. and Japanese markets, their mutual relations and game plans are inevitably major concerns for Korea and other small economics(ibid.; 54-55).

Table 2-1. Major Trading Partners of ROK (% of total trade)

Source: EIU, 1994, EIU Country Profile; South Korea and North Korea 1994-95, P. 44.

2. Korean Economy in the Era of Challenge and Globalization

1) Korean Economy: Past and Present

The 1960s and 1970s marked Korea's great leap toward a semideveloped state, and the 1970s and 1980s saw the transition from semidevelopment to economic maturity in Korea. Can Korea continue to grow rapidly and follow Japan into the ranks of non-western advanced countries? Both Korean and foreign experts have tried to answer this question. Generally, foreigners tend to be more optimistic than Koreans about the future of the Korean economy(Byung-nak Song, 1990; 231). Dr. Cho Soon also argues that Korea can be optimistic about the abundant growth potential of the country. The many good scientists educated abroad can enhance the level of science and technology. There are many good, experienced administrators who can establish order and discipline. And above all, there are people who still work very hard. the Korean people are now, as ever before, demonstrating exuberant energy in their pursuit of economic gain. As long as these motives are guiding economic life, a significant slowdown in economic activity is unthinkable, and the growth of the economy is assured(Cho Soon, 1994; 196-197). Korea has attained the rapid economic growth except 1980 since 1960s. Table 3-1. shows Korea's major economic indicators over the past five decades.

Table 3-1. Korea's Major Economic Indicators over the Past Five Decades

   Source: The Korea Economic Weekly, August 21, 1995.

Globalization characterizes today's world economy to the extent that private firms are increasingly carrying out their business on a global scale. Intensifying competition in international markets, globalization no longer confines the economic activities of private firms within national boundaries. Consequently, globalization highlights two trends in the international division of labor: in one, the performance of firms within an industry is increasingly identified with the performance of the nation; in the other, there is a strong interaction effect between the investment strategies and technological sophistication of the firms and changing trade patterns(Honggue Lee, 1996; 4-5). As you see Table 3-2. Korean Firms' Overseas Investment has increased and extended with the open-door policy. The area of foreign investment has broadened steadily all over the world. But it still leaves a problem that Korea's Foreign investment is concentrated with South East Asia and America.

Table 3-2 Korean Firms' Overseas Investment