Korea has steadily expanded its FTA network since the Korea-Chile FTA in 2004. Currently, Korea has FTAs with 45 trading partners including the world’s top three economic blocs, the U.S., EU, and ASEAN plus India. It is expected that nearly half of Korea’s total trade volume will be carried out with its FTA partners, taking into account of the Korea-China FTA, under current negotiation.
This study sheds light on the economic impact of FTAs in Korea, focusing on the agreements with Chile, Singapore, ASEAN, and EFTA. In particular, the study aims to identify how the FTAs affect exports and imports, outward and inward FDIs, and productivity and employment as the channels through which they ultimately lead to economic growth in Korea.
The findings from this study are as follows: first, the FTAs have promoted trade between Korea and its FTA partners by fostering closer bilateral economic relations as well as reducing bilateral tariff rates. Korea has diverted its suppliers of raw materials and capital goods to its various partner countries such as Chile, ASEAN, and EFTA through the FTAs.
Second, the number of firms, particularly SMEs, that newly enter the export market has rapidly increased since the FTAs, and the new entrants and SMEs experienced a higher export growth rate than the existing large exporters during the post-FTA periods. Hence it is revealed that the FTAs have played a significant role in the extensive margin of exports.
Third, there has been an upsurge in overseas investments made by Korean companies through the FTAs. The FTAs have encouraged vertical investments in the developing countries as cheap manufacturing bases and horizontal investments in the services sectors of the developed countries. Meanwhile, this study shows that the FTAs have stimulated the inflow of FDIs to Korea, mainly from the high income partners.
Fourth, it is estimated that the FTAs have contributed to the increases in productivity and employment of firms that export to the FTA partners. In particular, the impact on productivity of the FTAs tended to be magnified over time while their impact on employment was mostly delivered in less than 3 years after the inception of the FTAs. (The rest is omitted.)
- 한국 기발효 FTA의 경제적 효과 분석(The impact of free trade agreements on economic performance in Korea)
- Bae, Chankwon; Kim, Jeong-Gon; Keum, Hyeyoon; Jang, Yong Joon배찬권; 김정곤; 금혜윤; 장용준
- 대외경제정책연구원(Korea Institute for International Economy Policy)
한국 기발효 FTA의 경제적 효과 분석(The impact of free trade agreements on economic performance in Korea)
서울(Seoul) : 대외경제정책연구원(Korea Institute for International Economy Policy)
|Series Title; No||연구보고서(Policy Analysis) / 12-03|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Trade|
|Holding||대외경제정책연구원(Korea Institute for International Econom|