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Long-run effects of the Korea-China free-trade agreement

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Frame of Image hina free trade agreement on the Korean economy, the manufacturing sector in particular. The model is based on Yaylaci and Shikher (2014) which uses the Eaton-Kortum methodology to explain intra-industry trade. The model predicts that the Korea-China FTA will increase Korea-China manufacturing trade by 56%, manufacturing employment in Korea by 5.7% and China by 0.55%. The model also predicts significant reallocation of employment across industries with the Food industry in Korea losing jobs and other industries there gaining jobs, with the Medical equipment industry gaining the most. There will be some trade diversion from the ASEAN countries, as well as Japan and the United States. Keywords: Korea-China Free Trade Agreement, Manufacturing Sector, Comparative Advantage, Employment, Trade Diversion JEL Classification: F13, F17, F47
I. INTRODUCTION
In recent years, Korea has successfully signed free-trade agreements (FTA) with a number of partners including the U.S., EU and ASEAN. Korea and China
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This paper represents the research and opinions of its authors. It is not meant to represent in any way the views of the U.S. International Trade Commission or any of its individual Commissioners. The previous version of the paper was published as CERK International Conference Working Paper with the title “A study of the effects of the Korea-China free-trade agreement,” in 2014. This work was supported by the National Research Foundation of Korea Grant funded by the Korean Governm


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Title Long-run effects of the Korea-China free-trade agreement
Similar Titles
Material Type Articles
Author(English)

Kim, Sunghyun; Shikher, Serge

Publisher

[Sejong]:Korea Institute for International Economic Policy

Date 2015
Journal Title; Vol./Issue Journal of East Asian Economic Integration:vol. 19(no. 2)
ISBN 2287-8793
Pages 26
Subject Country China(Asia and Pacific)
South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Trade
Holding KIEP; KDI School

Abstract

This paper uses a 53-country 15-industry computable general equilibrium model of trade to analyze the effects of the Korea-China free trade agreement on the Korean economy, the manufacturing sector in particular. The model is based on Yaylaci and Shikher (2014) which uses the Eaton-Kortum methodology to explain intra-industry trade. The model predicts that the Korea-China FTA will increase Korea-China manufacturing trade by 56%, manufacturing employment in Korea by 5.7% and China by 0.55%. The model also predicts significant reallocation of employment across industries with the Food industry in Korea losing jobs and other industries there gaining jobs, with the Medical equipment industry gaining the most. There will be some trade diversion from the ASEAN countries, as well as Japan and the United States.