Evaluation of a Decade of Korea's FTA Policy

Kim, Young Gui

doi:10.2139/ssrn.2771088

Cited by 1 publication

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“…In general, to evaluate the effectiveness of policy decisions to participate in RTA networks, the trade effects of RTAs should be estimated before and after the implementation. Quite a few studies have been conducted by applying the computable general equilibrium (CGE) model analysis and predicted significantly positive gains from freer trade between Korea and the ASEAN countries (Kim, 2015; Nugraheni and Tri, 2018; Park and Kang, 2005; Park et al, 2012; Tongzon and Cheong, 2016). In contrast to the existing ex-ante CGE model analysis anticipating the positive trade creation effects of the AKFTA, however, the ex-post empirical analysis assessing the trade effects by separately measuring trade creation and diversion effect of the AKFTA has been rarely and partially conducted.…”

Section: Introductionmentioning

confidence: 99%

“…In contrast to the existing ex-ante CGE model analysis anticipating the positive trade creation effects of the AKFTA, however, the ex-post empirical analysis assessing the trade effects by separately measuring trade creation and diversion effect of the AKFTA has been rarely and partially conducted. Kim (2015) assessed the effectiveness of Korea’s FTA policy from 2004 until 2015 by applying a gravity model and finds that bilateral trade between Korea and ASEAN has been significantly increased by the formation of the AKFTA. However, Kim (2015) does not distinguish between the trade creation and diversion effect at the industry level.…”

Section: Introductionmentioning

confidence: 99%

“…Kim (2015) assessed the effectiveness of Korea’s FTA policy from 2004 until 2015 by applying a gravity model and finds that bilateral trade between Korea and ASEAN has been significantly increased by the formation of the AKFTA. However, Kim (2015) does not distinguish between the trade creation and diversion effect at the industry level. Recently, Cho et al (2020) also assessed the effectiveness of Korea’s FTA policy for the last 15 years by applying a gravity model and found that bilateral trade flows between Korea and its FTA partners have been mostly increased.…”

Section: Introductionmentioning

confidence: 99%

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An ex-post analysis of trade effects of the ASEAN–Korea Free Trade Area (AKFTA) from Korea’s Perspective

Lee

Park

2021

International Area Studies Review

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This paper empirically analyzes the effectiveness of the ASEAN–Korea Free Trade Area (AKFTA) focusing on the ex-post trade creation and diversion effects with controlling related intra-bloc and extra-bloc regional trade agreements (RTAs) and economic characteristics of interconnected economies. The quantitative analysis applies a gravity model regression analysis by specifying standard pooled ordinary least squares and fixed effects regression models. We observe that the AKFTA turned out to be more favorable for Korea in terms of trade balance with ASEAN. We find that the AKFTA is a desirable trade creating RTA strongly driven by intra-bloc export activities between members and does not divert but generates more export to and import from non-members. Thus, we strongly support that the AKFTA facilitates trade between intra-bloc members and their trade with extra-bloc non-members as well. Besides which, we find that the trade creation effects of the AKFTA are industry-specific and sector-specific. For the manufacturing industry, the trade creation effects of the AKFTA are generated by both intra-bloc and extra-bloc import activity but not from extra-bloc export activity. However, for the services industry, all the intra-bloc and extra-bloc export and import activities contribute to the trade creation effects. Interestingly, we find that the trade creation effects of the manufacturing industry are smaller than those of the services industry. Considering restrictive service schedules of specific commitments in the AKFTA agreement on trade-in services compared to trade-in goods provisions, rearranging the trade-in services provisions is necessary to generate more trade gains in the future.

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