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Long-run Effects of the Korea-China Free-Trade Agreement

Author

Listed:
  • Kim, Sunghyun

    (Sungkyunkwan University)

  • Shikher, Serge

    (U.S. International Trade Commission)

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.

Suggested Citation

  • Kim, Sunghyun & Shikher, Serge, 2015. "Long-run Effects of the Korea-China Free-Trade Agreement," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 19(2), pages 117-142, June.
    • Handle: RePEc:ris:eaerev:0025
    DOI: 10.11644/KIEP.JEAI.2015.19.2.293
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    Citations

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    Cited by:

    1. Jeffrey J. Schott & Cathleen Cimino, 2014. "Should Korea Join the Trans-Pacific Partnership?," Policy Briefs PB14-22, Peterson Institute for International Economics.

    More about this item

    Keywords

    Korea-China Free Trade Agreement; Manufacturing Sector; Comparative Advantage; Employment; Trade Diversion;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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