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Trade diversion and trade deficits : The case of the Korea-U.S. trade agreement

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  • Trade diversion and trade deficits
  • Russ, Katheryn N.; Swenson, Deborah L.
  • National Bureau of Economic Research


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Title Trade diversion and trade deficits
Similar Titles
Sub Title

The case of the Korea-U.S. trade agreement

Material Type Reports
Author(English)

Russ, Katheryn N.; Swenson, Deborah L.

Publisher

Cambridge : National Bureau of Economic Research

Date 2019-02
Series Title; No NBER Working Paper Series / 25613
Pages 28
Subject Country United States(Americas)
South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Trade
Government and Law < International Politics
Holding National Bureau of Economic Research
License

Abstract

We study whether tariff preferences conferred on South Korean goods through the implementation of the Korea-U.S. Free Trade Agreement (KORUS) drew U.S. import demand away from other U.S. trading partners through the phenomenon known as trade diversion. In the two years following the implementation of KORUS, trade diversion was particularly strong for U.S. imports of consumption goods and for trade partners who already had free trade agreements with the U.S. Our estimates of trade diversion sum to $13.1 billion in 2013 and $13.8 billion in 2014. Notably, these estimates of trade diversion are roughly of the same magnitude as the increase in the U.S. bilateral goods trade deficit with South Korea. Thus, while increased U.S. imports from South Korea may have increased the U.S.-South Korea bilateral trade deficit, the fact that KORUS diverted U.S. import demand away from other trading partners implies new U.S. imports from Korea stimulated by the KORUS did not expand the overall U.S. trade deficit.