Evaluation of a Decade of Korea's FTA Policy

Abstract

We analyze Korea’s FTA policy based on the outcomes of recent bilateral FTAs, in terms of achieving policy objectives. While many previous studies mainly focused on trade impacts under bilateral FTAs, this study analyzes the overall economic impact of FTAs in terms of growth and welfare, as changes in bilateral trade may affect global trade and the general economy in a variety of ways. In order to analyze the overall effect of FTAs, we adopt the Computable General Equilibrium (CGE) approach. With a CGE model, the macro economic impacts of FTAs can be calculated taking into account the complicated interactions among economic agents and industries. The growth effect in the EU shows the high-est results, followed by 0.9% growth and an additional 0.43% and 0.11%, in the ASEAN and Chile respectively. In addition, by com-paring the overall growth effect of FTA on total economic growth in 2013, the growth impact of FTAs accounted for 1.19% among 3% of total economic growth in Korea. This implies that Korea, as one of the most open economies in the world, could sustain positive growth rates due to FTAs such as the Korea-ASEAN FTA, despite the trade collapse during the global financial crisis.