Abstract
We empirically analyze the trade effect of the preferential trade arrangement (PTA) of Korea for least developed countries (LDCs). In 2000, Korea launched PTA that allows duty-free and quota-free market (DFQF) access to LDCs. Korea has granted DFQF access to LDCs and extended preferences for LDCs since 2012 . However, imports from LDCs account for less than 1% of Korea’s total imports. We incorporate Silva and Tenreyro(2006)’s PPML method in the traditional gravity model for unilateral preferential schemes as in Gil-Pareja, et al.(2014) to address “zeros” in trade data and the endogeneity issues between trade and trade agreements. An empirical study of Korean 2000-2020 disaggregated import data shows that DFQF failed to increase LDCs’ exports. Korea may need to reform DFQF and design mutually beneficial trade agreements for LDCs.
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