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The Impact of the Canada-Korea Free Trade Agreement as Negotiated

Author

Listed:
  • Ciuriak, Dan

    () (Ciuriak Consulting Inc.)

  • Xiao, Jingliang

    () (Ciuriak Consulting Inc.)

Abstract

This paper analyzes the impact of the Canada-Korea Free Trade Agreement on the basis of the published text and agreed schedule of commitments. We find that the Agreement reinforces existing patterns of comparative advantage between Canada (agriculture and resource-based sectors) and Korea (autos and other industries). The sensitive sectors that held up the deal for years - autos into Canada and beef into Korea - witness major trade gains, but are not unduly disrupted. In both economies, the major output gains otherwise come in non-traded services sectors, driven by income effects. We find that trade diversion effects are quite significant; this lends support for the domino theory of major free trade agreements - since the Korea-EU agreement broke the ice, the pressure has intensified on third parties to re-level playing fields by striking their own deals. The study breaks new ground in modelling services trade by developing policy impacts based on the extent to which the text of the Agreement modifies Korea's and Canada's scores on the OECD's Services Trade Restrictiveness Index and by providing estimates of Mode 3 Services trade impacts. The analysis of the Agreement as negotiated, the present study, in our view, is a step forward in understanding the impact of modern free trade agreements.

Suggested Citation

  • Ciuriak, Dan & Xiao, Jingliang, 2014. "The Impact of the Canada-Korea Free Trade Agreement as Negotiated," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 18(4), pages 425-461, December.
  • Handle: RePEc:ris:eaerev:0036
    DOI: 10.11644/KIEP.JEAI.2014.18.4.288
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    File URL: http://dx.doi.org/10.11644/KIEP.JEAI.2014.18.4.288
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    Citations

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    Cited by:

    1. Dan Ciuriak & Ali Dadkhah & Jingliang Xiao, 2016. "Better in than Out? Canada and the Trans-Pacific Partnership," e-briefs 236, C.D. Howe Institute.

    More about this item

    Keywords

    Canada; Korea; Free Trade Agreement; CGE; STRI; Mode 3 services;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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