Economic evaluation of the trilateral FTA among China, Japan, and South Korea with big data analytics

Abstract

This study quantitatively analyzes the impact of a free trade agreement (FTA) among China, Japan, and South Korea using big data analytics. Using game theory and the computable general equilibrium approach, it proposes a compromise between the two countries for agricultural protection, to reduce possible divergences and confrontations. The findings show that game results differ among the three countries as per interest indexes. Compared to full tariff exemption, an FTA with agricultural protection not only stimulates economic growth in the three countries but also reduces Japan and South Korea’s agricultural concerns and impact on employment. We also evaluate the impacts of the trilateral FTA on manufacturing and services industries. The results show that China will increase imports of energy-intensive products from Japan and South Korea, which may reduce domestic output and generate environmental benefits. Implementing the trilateral FTA with agricultural protection may reduce carbon emission in Northeast Asia by 6.53 million tons. This study can promote economic integration in Northeast Asia and coping with climate change. The analysis also highlights the importance of lifecycle management of energy-intensive industries in China, Japan, and South Korea.