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Economic Impact of a Potential Free Trade Agreement (FTA) Between the European Union and South Korea

Author

Listed:
  • Joseph Francois

    () (Johannes Kepler University Linz)

  • Hanna Norberg

    () (Lund (School of Economics and Business) and IIDE)

  • Martin Thelle

    (Copenhagen Economics)

Abstract

We analyze the effects of potential measures to liberalize trade between the European Union (EU25) and South Korea. Using a computable general equilibrium (CGE) model of world trade that incorporates the GTAP database, we evaluate two scenarios for an EU-Korea free trade agreement (FTA) and compare it to the maximum potential given by a full free trade agreement. We show that a realistic FTA scenario (called ÒPartial 1Ó) yields a total gain for the two economies of 26 percent of the potential in a full FTA. If liberalization of trade in services is taken a step further, as in our more ambitious scenario (called ÒPartial 2Ó), total gains increase to 46 percent of the total potential from a full FTA between EU and Korea. Our results show that both economies stand to gain economically from all analyzed levels of trade liberalization, but the gains are unevenly distributed. Korea will obtain two-thirds of the total gains from an EU-Korea FTA in all scenarios, basically because the Korean economy initially is more protected from international competition than the EU economy, and therefore will benefit more from increased competition.

Suggested Citation

  • Joseph Francois & Hanna Norberg & Martin Thelle, 2007. "Economic Impact of a Potential Free Trade Agreement (FTA) Between the European Union and South Korea," IIDE Discussion Papers 20070301, Institue for International and Development Economics.
  • Handle: RePEc:lnz:wpaper:20070301
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    Citations

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    Cited by:

    1. Botezatu, Elena, 2007. "EU – ASEAN free trade area: regional cooperation for global competitiveness," MPRA Paper 4946, University Library of Munich, Germany.
    2. Joseph Francois & Miriam Manchin, 2009. "Economic Impact of a Potential Free Trade Agreement (FTA) Between the European Union and the Commonwealth of the Independent States," CASE Network Reports 0084, CASE-Center for Social and Economic Research.
    3. Itakura, Ken, 2014. "Impact of liberalization and improved connectivity and facilitation in ASEAN," Journal of Asian Economics, Elsevier, vol. 35(C), pages 2-11.
    4. repec:bla:worlde:v:40:y:2017:i:10:p:2255-2276 is not listed on IDEAS
    5. Konstantin KHOLODILIN & Tanja FENDEL, "undated". "Economic Impact of a Potential FTA Between EU and ASEAN on the German Economy," EcoMod2008 23800060, EcoMod.
    6. Mitra, Devashish & Shin, Jeongeun, 2012. "Import protection, exports and labor-demand elasticities: Evidence from Korea," International Review of Economics & Finance, Elsevier, vol. 23(C), pages 91-109.

    More about this item

    Keywords

    CGE; EU-Korea Free Trade Area; GTAP;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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