The Effect of South Korean FTAs on Trade: Country-level and Industry-level Analyses

I evaluate the degree to which South Korea’s FTAs have affected trade between South Korea and its FTA partner countries and trade of 11 industrial sectors of South Korea. I use both a fixed effects regression model and a Poisson pseudo-maximum likelihood fixed effects model, in order to deal with biases from country-pair fixed effects and zero-trade values. For the country-level analysis, I utilize 1990–2011 trade data of 95 countries from the IMF’s Direction of Trade Statistics and find that the South Korea–Chile and South Korea–India FTAs have had positive effects on trade, but the effect of the South Korea–EFTA FTA has no statistical significance. The South Korea–ASEAN FTA has had a wide spectrum of trade effects among the 10 ASEAN countries. Additionally, I try to estimate the differential effects of South Korea’s FTAs on its exports from 11 industrial sectors using HS 4-digit–level export data for South Korea to 33 countries. Korean FTAs have considerably increased South Korea’s textile, food, paper, and chemical exports. However, Korean FTAs have not brought any positive effects on electronics and motor industry exports in South Korea.