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The impact of FTAs on FDI in Korea

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Frame of Image ’s FTAs as of 2012
Country (year of inception) Chile (Apr. 2004) EFTA (Jun. 2006) India (Jan. 2010) Peru (Aug. 2011) Singapore (Mar. 2006) ASEAN (Jun. 2007) EU (Jul. 2011) U.S. (Mar. 2012)
A major feature of FTAs is the elimination of bilateral tariffs over time. If FDI is a substitute for exports because tariffs account for a substantial portion of the costs for exporting, FTAs should lead to reductions in FDI. On the other hand, if FDI is complementary with exporting, given vertical specialization in production, FTAs should encourage additional FDI because it lowers the costs of intra-firm trade. After all, the impact of FTAs on FDI could appear in different guises depending on motives behind investment. study aims to empirically identify how FTAs affect outward and inward FDI at the bilateral level in Korea, focusing on the agreements with Chile, Singapore, ASEAN, and EFTA. In order to do so, we use bilateral FDI data from OECD over the period of 2000 through 2010.
This
It is unclear, theoretically and empirically,
how FTAs should affect the flows of FDI.
The Impact of FTAs on FDI in Korea
2
Bilateral FDI in Korea Outward FDI from Korea to its FTA partners,
Chile, Singapore, EFTA, and ASEAN tended to grow at a faster rate than the total amount of its overseas investment. After the inception of Korea–Chile FTA, Korea increased investment in Chile mainly in the mining industry for resource development while it stayed still at the
Table 2. Korea’s Outward FDI (in millions of


Full Text
Title The impact of FTAs on FDI in Korea
Similar Titles
Material Type Articles
Author(English)

Bae, Chankwon; Keum, Hyeyoon

Publisher

Korea Institute for International Economic Policy

Date 2013-06
Series Title; No KIEP Opinions / 3-19
Pages 6
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Economic Administration
Economy < Direct Investment