Korea Free Trade Agreement Research Articles

Exploring the effects of rules of origin and tariff margins on China's export enterprise under the China–Korea Free Trade Agreement

This study explores the effects of rules of origin (ROOs) and tariff margin on China's export enterprise using Poisson pseudo‐maximum likelihood estimation and logit models with product‐level data under the China–Korea Free Trade Agreement (CKFTA). The findings reveal that increased ROOs have a negative effect on export value and enterprises' CKFTA use, while tariff margin is positively associated with export value. The estimation results examining export value also demonstrate that the effect of ROO is larger than that of tariff margin (in absolute terms); however, those concerning CKFTA use are the opposite. The study proposes suggestions for reducing enterprises' costs to promote trade and economic development between China and South Korea under the CKFTA based on the results.

Learning to Use Trade Preferences: A Firm and Transaction Level Analysis of the EU–South Korea FTA

Abstract This article examines imports by Swedish firms and the utilization of the tariff preferences offered by the EU–South Korea Free Trade Agreement. To benefit from tariff preferences, the importer must make a formal request to use the preferences and also document the origin of the imported products (with a certificate of origin provided by the foreign exporter). This may be costly, and some importers choose to pay import tariffs even when tariff preferences are available. Hence, the preferences are not fully utilized. Using a detailed firm–transaction level data set on Swedish imports from South Korea, we analyse the determinants of preference utilization and how firms learn to use preferences. The results show that preference utilization is strongly correlated with potential duty savings, which depend on the preference margin and the size of the import transaction. From a learning perspective, we find that preference utilization is closely related to the number of import transactions undertaken by the firm, suggesting a learning-by-doing mechanism. The length of time the firm has been involved in importing activities plays a smaller role.

Survey on Vietnam - Korea Trade Situation after VKFTA (2015-2020): Achievements and Issues

After officially establishing diplomatic relations in 1992, trade relations between Vietnam and Korea have been increasingly consolidated and developed with many important agreements being signed. The Vietnam - Korea Free Trade Agreement (VKFTA) applied from the end of 2015 is expected to create an important turning point, supporting the two countries' trade growing stronger and deeper. In fact, after 5 years of applying VKFTA, based on the background of similarities and differences, Vietnam - Korea trade exchange has continuously developed in many fields with impressive outcomes. The objectives of the presentation are: 1) to study the results of trade cooperation between Korea and Vietnam after applying VKFTA (2016-2020), (2) to find some difficulties and (3) to offer suggestions for Vietnam to improve the efficiency of trade relations with South Korea through a rudimentary SWOT analysis.

Are preferential agreements beneficial to EU trade? New evidence from the EU–South Korea treaty

AbstractThis paper empirically investigates the effect of the EU–South Korea free trade agreement (FTA) on manufacturing trade flows. By applying a state‐of‐the‐art structural gravity model with intra‐national (i.e. domestic) trade and using disaggregated data, we quantify both the trade impact and the observed heterogeneity in the FTA estimates. In line with literature, we find that the EU–South Korea FTA exerted asymmetric effects in bilateral exports across directions of trade. Compared to previous studies, our findings suggest a different explanation for the poor performances of Korean exports to the EU in the post‐FTA period, namely offshoring patterns in electronics and a broad‐based decline in the shipbuilding industry. When we drop these two export categories from the analysis, we show that the FTA exerted a large effect on trade in both directions, increasing bilateral exports by about 30%. We then investigate the substantial observed heterogeneity in pair‐industry‐specific estimates of the FTA. The main source of variation is represented by asymmetries in ex‐ante trade barriers across sectors, with a prominent role for non‐tariff instruments. Stronger pre‐FTA regulatory intensity is associated to a high liberalisation potential, favouring larger FTA estimates. Tariffs instead do not explain the heterogeneity in the trade effects.

The Chile-Republic of Korea Free Trade Agreement: a synthetic control assessment

The Chile-Republic of Korea Free Trade Agreement: a synthetic control assessment

The Trade Effects of the EU-South Korea Free Trade Agreement: Heterogeneity Across Time, Country Pairs, and Directions of Trade within Country Pairs

AbstractThe EU-South Korea Free Trade Agreement, which entered into force in 2015, is an example of so-called “second-generation” regional trade agreements. Using the gravity equation and drawing on a novel dataset on trade in manufacturing goods (Monteiro in World Trade Organization, Geneva, 2020), I explore the heterogeneity in the trade effects of this agreement across time (anticipation and phasing-in/delayed adjustment), country pairs, and across trading directions within pairs (exports versus imports). First, the positive trade effect after the announcement vanished one year prior to entry into force. Second, on average exports of EU countries to South Korea rise, while imports of EU countries are not significantly affected, potentially reflecting differences in ex ante trade policies. Third, additional imports caused by the agreement are larger for those EU countries where South Korea accounted for a large share of extra-EU imports already before the agreement.

Sectoral FTA gains, conflicts, and the role of interindustry factor mobility: Evidence from Korea's free trade agreement

AbstractFree trade agreements (FTAs) can ignite domestic conflicts between export‐ and import‐competing industries over trade gains. However, if the factors of production, such as capital and labour, move freely across industries, the returns to factor owners will quickly converge. Then, sectoral conflicts over FTAs will be less likely to arise. We analyse the case of South Korea's FTAs to measure (a) sectoral FTA gains and (b) interindustry factor mobility and to examine (c) the role of interindustry factor mobility in mitigating sectoral conflicts over trade policies. South Korea is an ideal case study due to the low barriers to domestic geographic mobility and high trade dependence. Based on data on its trade with 252 countries and factor returns between 2002 and 2017, we find that export industries did not gain much from the FTAs, while the import‐competing agricultural sector was the winner. Sectoral conflicts greatly decreased over 2008–2010. Interindustry capital mobility plays a significant role in weakening the sectoral conflicts, while the impact of interindustry labour mobility is limited.

The economic and trade effects of the UK–Korea free trade agreement on the United Kingdom, Korea, Japan, China, and the European Union

AbstractWe explored a comparative static computable general equilibrium model with six regions and 12 sectors to estimate the impacts of the recent UK–Korea free trade agreement (FTA) along with the European Union (EU)–Korea FTA. The empirical results provide quantitative evidence of the impact on national GDP, national exports and imports by sector, and the changes in exports or imports among the United Kingdom, Korea, Japan, China, and the EU. The UK–Korea FTA, along with the EU–Korea FTA, increases GDP and welfare for the United Kingdom and Korea; moreover, there is a large increase in automobiles, transport equipment, and machinery exports between Korea and the United Kingdom. The GDP and welfare level of non‐member countries such as Japan and China will slightly decline. Exports from the United Kingdom and Korea to non‐member countries are also expected to decrease in most manufacturing sectors. The UK–Korea FTA will lead to increases in imports between the United Kingdom and Korea due to mutual trade creation effects and trade diversion effects. However, non‐member countries such as Japan's exports are expected to experience a large decline in automobiles to the United Kingdom and in most manufacturing products to Korea due to the negative impact of the UK–Korea FTA.

Assessing the impact of trade openness on CO2 emissions: Evidence from China-Japan-ROK FTA countries

After signing the Regional Comprehensive Economic Partnership trade agreement, China became a proposed signatory to another important trilateral free-trade agreement – the China-Japan-South Korea Free Trade Agreement. In the context of the agreement, we explore the potential effect and internal influencing mechanism of trade openness on this region's carbon emissions from 1970 to 2019. We further detect the impact of the agreement by splitting the full sample into two subsamples, one subperiod before the agreement was signed and the other after it was signed. Then we separately analyze the impacts of imports and exports on carbon emissions and find that: (i) Trade openness positively affects the greenhouse effect, and the signing of the agreement can reduce the promotion effect of trade openness on carbon emissions; (ii) imports contribute to increased carbon emissions while exports significantly reduce carbon emissions in a country; and (iii) expanding trade openness not only directly affects carbon emissions directly, but also has indirect impacts by affecting three main effects (i.e., scale effect, technical effect, and structure effect). Finally, several important policy suggestions are provided to mitigate the greenhouse effect and promote high-quality trade openness.

Economic Effect and Resolution Idea of the THAAD Political Conflict on South Korea’s Exports to China

South Korea deployed the Terminal High Altitude Area Defense (THAAD) antimissile system in response to North Korea’s nuclear test, leading to the Chinese government’s opposition to THAAD, citing national security concerns. Chinese consumers held a large-scale “boycott for Korean products” campaign in 2014. In the same year, the China–South Korea free trade agreement (FTA) was signed. This study compares the double-difference (DID) and triple-difference (DDD) models using the impact of the THAAD political conflict on South Korean exports. In the DID model, THAAD reduced South Korean exports, while in the DDD model, the FTA effectively alleviated the impact of THAAD. The net difference of the FTA’s impact on the commodities boycotted in response to the THAAD conflict exists because some boycotted commodities were promoted by the FTA while others were not. The effect of the THAAD event shock was significant only in the first two years, with minimal subsequent changes in growth. THAAD and FTA’s dynamic effects provide evidence of how political conflict can eventually influence popular opinion and how the trade policy plays a significant role in the national conflict resolution. Finally, the study provides additional evidence on the effect of non-tariff barriers triggered by THAAD on the service industry.

The research characteristics of China and South Korea FTA in Chinese academic circle -- Visual analysis based on CiteSpace

China and South Korea jointly agreed to start the research of Free Trade Agreement(FTA) in 2004, and officially signed the China · Korea FTA in 2015 which promoted entering a new era of free trade between the two countries. Meanwhile, scholars of the two countries have paid attention through the whole process, from joint research, signing of the agreement, taking effects to current second phase of free trade negotiation. Scholars’ academic research on China · Korea FTA has played an important guiding role in promoting the long-term economic and trade development, and in deepening free trade between the two countries. This paper, based on the database of CNKI and CiteSpace 5.1.r8 SE statistics software, conducted a statistical study of relevant literature of China · Korea FTA from 2001 to 2018, and operated a visualization to analyse its research characteristics. The study found that most of relevant domestic research institutions are located in the coastal and Northeast China, which are scattered and lack of interaction, and have a low degree of participation in international cooperation. Chinese academic community has not formed core scholars with high output and lack of long-term cooperative research teams. Chinese academic research’s key words are such as ‘free trade zone’, ‘agricultural products’, ‘regional economic integration’, ‘China, Japan and South Korea’, etc; The academic research has gone through four stages: exploratory stage —development stage —flourishing stage --later stage. These research outputs have different characteristics in each stage, and their development trajectories are basically synchronized with the development process of China · Korea FTA.

Trade Liberalization Along the Firm Size Distribution: The Case of the EU-South Korea FTA

In 2011, the EU-South Korea Free Trade Agreement (EUKFTA) entered into force. With its focus on non-tariff barriers (NTBs), it is a leading example of a deep new generation agreement. Using detailed French customs data for the period 2000 to 2016, we investigate how exporters of different size have benefitted from the agreement. Applying a diff-in-diff strategy that makes use of the rich dimensionality of the data, we find that firms with larger pre-FTA sizes benefit more from the FTA than firms at the lower end of the size distribution, both at the extensive (product) and the intensive margins of trade. The latter finding is in surprising contrast to leading theories of firm-level behavior. Moreover, we find that our main result is driven by NTB reductions rather than tariff cuts. In shedding light on the distributional effects of trade agreements within exporters, our findings highlight the need for effective SME-chapters in FTAs.

Under the Epidemic Situation: The Study of Bilateral Trade Zone and Agreement Between China and Korea

In 2019, Coronavirus outbroke, and many countries in the world were impacted by COVID-19. The COVID-19 epidemic has clouded the global economic outlook. In the current dynamic situation of the world, businesses have need to integrated internationally. Chinese and Korean government has progressively upgraded the free trade zones (FTZ) to attract greater foreign investment and tourism development. In this article, we discuss the important factors for tariff concessions in the China and Korea free trade agreement (FTA). Further, according to Korean Tourism Development Bureau (KTDB), in perspective of tourism China and Korea are more prominent in the Universal Economy. Chinese and Korean tourists are rapidly integrated in the world. Consequences created by Free Trade Zone, it is suggested that both countries should consider strategies to combat negative factors by diversifying the range of products and services and both countries can also use tourism-related professionals in areas that support FTZ's economic development.

China–Japan–Korea free trade agreement and legal issues regarding the construction of the Northeast Asia energy interconnection

The China–Japan–Korea Free Trade Area and the Northeast Asia energy interconnection have great potential for further development but have some common obstacles. The negotiations for the China–Japan–Korea Free Trade Agreement (FTA) and the construction of the Northeast Asia energy interconnection can complement each other: the former provides a legal framework for the latter and the latter facilitates the former. This paper analyses the legal issues in constructing the Northeast Asia energy interconnection, in the context of the China–Japan–Korea FTA negotiations, and then proposes that based on the characteristics of energy, the legal issues can be resolved by referring to the existing provisions of international law and relevant rules, within the China–Japan–Korea FTA.

Trade Effects of the EU–South Korea Free Trade Agreement in the Automotive Industry

The EU–South Korea free trade agreement (FTA) represents a case of comprehensive trade liberalization between two major economies with large automotive industries. This article examines and compares the total and automotive industry trade effects of the EU–South Korea FTA. The empirical gravity analysis shows asymmetric effects between the bilateral exports of EU and Korea. Trade-enhancing effects are found in both gross and value-added trade indicators of EU automotive exports, while no substantial effects are detected in Korean exports. The post-FTA trade dynamics suggest that the removal of industry-specific non-tariff barriers (NTBs) played an important role in facilitating EU automotive exports.

Форматы многостороннего и двустороннего экономического сотрудничества в Северо-Восточной Азии

The review is devoted to the formats of bilateral and multilateral economic cooperation of the Northeast Asia (NEA) countries. NEA comprises six countries that account for 23,3% of the worldOs population, 25,7% of the global GDP and 22,1% of the worldOs merchandise exports. Despite their considerable potential, the NEA countries do not have six-party agreements on trade, investment, customs or migration cooperation, preferring projects with a wider range of participants. There are no such agreements on a trilateral basis between the NBig ThreeO countries, which include China, Japan and the Republic of Korea and act as the NEA NlocomotiveO. These areas of cooperation are developed mainly on a bilateral basis. The majority of free trade agreements (FTAs) signed by NEA countries are with non-regional partners. At the same time, the DPRK is characterized by a complete lack of agreements, and Russia does not have agreements with subregional partners. Currently there are only two bilateral FTAs in force between the NEA countriesaO China-Republic of Korea Free Trade Agreement and Japan-Mongolia Economic Partnership Agreement. The process of negotiations and implementation of agreements (both multilateral and bilateral) is significantly complicated by the periodic aggravation of Sino-Japanese and Korean-Japanese relations, as well as the DPRK nuclear weapons issue

The US–Korea free trade agreement as a shock to product market competition: Evidence from the Korean stock market

This study examines the effect of product market competition on stock returns by treating the establishment of the US−Korea Free Trade Agreement (KORUS FTA) as an external shock. We use the degree of tariff reduction resulting from the KORUS FTA to construct a unique dataset for measuring product market competition. We sort firms into high-tariff-change (treatment group) and low-tariff-change groups (control group) and use the controlled difference-in-differences method to mitigate any possible endogeneity problems. We find clear empirical evidence that product market competition significantly negatively affects stock returns.

The China–Japan–Korea Trilateral Free Trade Agreement: Why Did Trade Negotiations Stall?

Launched in 2013, the China–Japan–Korea Free Trade Agreement (CJKFTA) negotiations have slowed in recent years. The three countries have convened at 14 rounds of negotiations but failed to make any substantial breakthrough. A number of previous studies have presented a crisis‐driven approach in explaining the progress of the CJKFTA, and argue that the accomplished China–Korea Free Trade Agreement (CKFTA) will accelerate the CJKFTA negotiation. This study questions optimism over the CJKFTA, and investigates the reasons for the stalemate of ongoing negotiations. It does so by considering three sets of factors that have stalled the negotiation – economic interdependence, domestic politics, and industry interest groups – in addition to international politics/national FTA policies. First, the trilateral economic interdependence shows a downward trend in recent years and has weakened the necessity of having a trilateral FTA. Second, domestic sectoral interests remain highly divergent over a potential CJKFTA; opposition from loser groups in Japan remains strong, and the majority of the Korean business world still regard the utility of an accomplished CKFTA more highly than an accomplished CJKFTA. Finally, the three countries have failed to narrow the gaps during past negotiations because no party views the CJKFTA as a top priority, nor wishes to take the leadership. China does not want a high‐level CJKFTA; Japan's lack of political incentive and Korea's cautious “wait and see” stance have also led to a stalemate of the negotiations. In consequence, this article delivers a relatively pessimistic vision for the CJKFTA negotiation in the near future.

The effect of ASEAN-korea free trade agreement (AKFTA) on Indonesia trade: a gravity model approach

The aim of this research is to analyze the effect of ASEAN Korea Free Trade Agreement (AKFTA) on Indonesia Trade with gravity model approach using panel data. This research is using Hausman and Chow test to choose the best between the Fixed Effect model (FEM) and Random Effect Model (REM). The test result shows that REM is the best model choosen to analyze the effect from GDP per capita, Exchange rate, distance and AKFTA Policy to the import from 14 AKFTA country economies to Indonesia. The result from R2 shows that the variation of independent variables (GDP per capita, Exchange rate, distance and AKFTA Policies) affected the variation of dependent variable (Import) as 54 percent. Meanwhile, from the gravity theory, the trade among AKFTA economies to Indonesia has bring positive impact as the distance has positive sign and lead to form trade creation. The variable of dummy policy has negative and significantly affected the import.

The EU–South Korea FTA: Which Sector Benefits the Most?

Purpose - This study empirically analyzes the effects of the European Union-South Korea Free Trade Agreement on Korean exports in major sectors. Design/Methodology - This study is based on the augmented gravity model with a panel data set covering 51 countries between the years 2000 and 2015. Findings - Main findings of the present study is that the agreement has affected the chemical sector the most. Fixed effects estimation predicted a positive trade effect of 38.3%, while Poisson maximum likelihood estimation predicted an impact of 4.75% in the chemical export sector. Regression results for the other sectors only show insignificant effects. Originality/value - The findings imply that the effects of the EU-South Korea free trade agreement on the Korean exports are quite specific compared to the European ones, meaning that the Korean government should focus on sector-specific programs to maximize the welfare benefits of the free trade agreement.