1. Progress Report on “Nurturing an Integrated Logistics and Transportation System for the APEC Economies” 2006-2008

2. Background and Purpose of Study Proliferation of FTAs in global economy and participation of the Northeast Asian Countries –197 FTAs have reportedly come into effective as of July 2006 –Over 50 percent of world trade takes place within these FTAs –Countries in Northeast Asia are actively participating in these phenomenon since the late 1990s. (As of June 2007)KoreaChinaJapan Completed Negotiation Chile, Singapore EFTA, ASEAN, USA ASEAN, Hong Kong Macao, Chile, Pakistan Singapore, Mexico Malaysia, Philippines, Thailand On-Going NegotiationJapan, Canada, Mexico, India New Zealand, GCC Australia, Singapore ASEAN, Indonesia Chile, Brunei, GCC

3. Trade volume within the Northeast Asian countries is likely to expand further, and issues of the regional integration in transport logistics become more important. –Hummels (1999) estimated 1% reduction in transport costs will lead to 5~8% increase in market shares. –Nuno and Venables (2001) proved that increase in trade volume is highly depends on the transport costs. Background and Purpose of Study The study will analyze the impacts of the proliferation of FTAs in Northeast Asia on regional logistics system as well as the economic effects of the logistic integration in Northeast Asia (or “seamless logistics in Northeast Asia”)

4. Major Outcomes of the Study 2006 (1) The objective of the study 2006: –To gather basic data and develop a framework in order to overcome the obstacles from different levels of logistics system –To develop a more integrated logistics and transportation system for the economies of China, Japan, and Korea The major contents : –Analyzing the logistics costs of the each economy –Identifying barriers to integration of a logistics and transportation system –Formulating action plans for realizing the vision of nurturing an integrated logistics system

5. China (2005) Japan (2003) Korea (2003) Total Logistic Costs (Domestic + International) US$444.5 billionUS$333.3 billionUS$120.9 billion 21.3 % of GDP8.2% of GDP12.5% of GDP Total Transportation Costs US$244.7 billionUS$223.3 billionUS$ 99.2billion 55.0 % of total logistic costs 70.0 % of total logistic costs 81.4 % of total logistic costs Major Outcomes of the Study 2006 (2) The logistics costs of each economy:

6. Impediments to integration of a logistics and transportation system 1) Physical & Technical barriers Literature reviewsField survey Insufficient logistics infra Lack of standardization of shipping boxes Incompatibility of logistics equipment Limitation of transportation equipment Safety issues due to obsolescence of equipment Shortage of unloading equipment in ports Size of container(12”) for railway transport between Japan-Korea Shortage of transport vehicles in inland China Standardization of pallets Major Outcomes of the Study 2006 (3)

7. 2) Customs barriers Literature reviewsField survey Insufficient availability of specialized labors Existence of divergence in customs systems Long delay for customs clearance Divergence of customs systems Absence of integrated EDI system Different regulations Long delay for quarantine 3) Information system barriers Literature reviewsField survey Absence of standardized documentation Low efficiency of cargo tracking systems Low connectivity of interaction between systems Supply-demand imbalance of empty containers due to lack of information system Diverse EDI documentation Major Outcomes of the Study 2006 (4)

8. 4) Institutional & Legal barriers Literature reviewsField survey Differentiation on foreign and domestic investors Restriction on areas of investment Additional costs incurred due to various logistics regulations Complicated paper work for import & export activities In 2006, due to various types of impediments, the additional costs occurred for shipment between Korea and China was estimated as US$41.9 million. –The costs of barriers amounted to US$704.8 million, accounting for 5.95% of the total exporting costs. –Additional costs of barriers mostly occurred in port operations. Major Outcomes of the Study 2006 (5)

9. Action plans for realizing the vision of nurturing an integrated logistics system in the area of Northeast Asia –Establishing an integrated international intermodal logistics system by standardizing logistics equipment Establishment of seamless door-to-door transportation system Elimination of barriers for efficient connectivity between a port and inland Establishment of global logistics centers in strongholds –Eliminating customs barriers by standardizing customs procedures Nurturing specialized expertise Simplifying customs inspection and quarantine Major Outcomes of the Study 2006 (6)

10. –Building an integrated information system by standardizing documentation and procedures Establishment of integrated logistics information network –Establishing an global logistics network by reforming institutional and legal issues Reforming institutions and regulations Enacting special law Major Outcomes of the Study 2006 (7)

11. Main Contents of the Study 2007 Concept of Logistics Integration –Case Study: EU Review and Analysis on FTAs in Northeast Asia and their Economic Effects Impediments to Logistics Integration in Northeast Asia –Perceptions of China, Japan and Korea on the creation of the ‘Seamless logistic systems in Northeast Asia’ –Literature Reviews /Conducting Survey Impacts of Proliferation of FTAs on regional logistics system and Economic Effects of Logistics Integration in Northeast Asia –Empirical Analysis (using Gravity Model)

12. The China-Japan-Korea Ministerial Conference on Maritime Transport and Logistics (September 2006)

13. Background From 1990s, economic interdependence among Northeast Asian countries, namely China, Japan and Korea, has intensified, with increasing amount of trade and investment. The gross volume of trade among the three countries recorded USD 400 billion in 2005, two times bigger than in 2000. Role of maritime transport and logistics among three countries became more significant. –Three countries contribute about 30 percent of the world’s container trade (120 million TEU) Many obstacles and impediments still remain due to the different systems and procedures among three countries. Requires efforts to promote the creation of a secure, efficient, cost-effective and seamless logistic system in Northeast Asia

14. Increasing Volume of Regional Trade, Proliferation of FTAs within the Region Need for reduction in transport costs for competitiveness enhancement Standardization Harmonization & Facilitation Cooperation Framework Creation of a Secure, Efficient, Cost-effective and Seamless Logistic System in Northeast Asia Barrier Reduction, Cooperative Development Need for Cooperation

15. China-Japan-Korea Ministerial Conference on Maritime Transport and Logistics The conference was held on September 7, 2006 in Seoul, Korea The Joint Statement was adopted with following issues: 1.The Ministerial Conference will be held once a year and developed into an intergovernmental cooperative channel. 2. The three countries would welcome the development of a logistics cooperation framework consisting of corporation and economic organization. 3. The three countries would welcome the research organization to carry out studies, particularly on the benefits of the seamless logistics system in North East Asia. 4. The detailed tasks will be implemented in accordance with a Plan of Actions.

16. Plans of Actions 1. Improve inappropriate logistics related institutions and system - Conduct survey of the private enterprises’ overseas operation in the three countries 2. Create conditions to realize the seamless logistics system in Northeast Asia - Conduct research of mutual access of trailer chassis in Northeast Asia - Make efforts to establish an effective inter-connected logistics information network - Exchange of information on maritime transport and logistics in Northeast Asia * Support expert’s study for establishing a database on maritime transport and logistics in Northeast Asia 3. Standardization of logistics equipment - Study jointly the issues of standardization of the domestic cargo container

17. Action Plans (cont) 4. Promote close cooperative relations among ports - Strengthen close cooperative relations among ports in the three countries through Northeast Asia Port Director-General Meeting. 5. Take measures to balance logistics security and efficiency - Share relevant information, exchange views on the establishment of Secure and efficient logistics 6. Promote mutual exchanges, cooperation and joint researches 7. Share the outcomes of discussion in the field of logistics 8. Establish environmentally less burdensome logistics policies

18. Thank you !