China's Accession to the World Trade Organization: Implications for the Korean Economy

Abstract

This paper is exploring the impact on the two proximate economies, Korea and China, of China’s accession to the World Trade Organization. We try to figure out how the aggregate effects, export performance, domestic production, and flows of foreign direct investments can be affected by this exciting event, using computable general equilibrium approach. Compared to great beneficial effects on China, the impact on the Korean economy would be marginal. In textiles, wearing apparels, and automobiles, Korea’s export to China is likely to increase while there may be small effect on the exports of electronics, chemicals, and machinery. Both China and Korea would benefit from the inflows of international direct investments on the global scale, but they can be fiercer competitors in attracting foreign investors with China’s membership in the World Trade Organization as a turning point.