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

Journal of East Asian Economic Integration, Vol. 19, No. 2 (June 2015) 117-142

26 Pages Posted: 8 Jul 2015 Last revised: 6 Nov 2016

See all articles by Sunghyun Henry Kim

Sunghyun Henry Kim

Sungkyunkwan University - Department of Economics

Serge Shikher

U.S. International Trade Commission

Date Written: June 30, 2015

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 ethodology 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.

Keywords: Korea-China Free Trade Agreement, Manufacturing Sector, Comparative Advantage, Employment, Trade Diversion

JEL Classification: F13, F17, F47

Suggested Citation

Kim, Sunghyun Henry and Shikher, Serge, Long-Run Effects of the Korea-China Free-Trade Agreement (June 30, 2015). Journal of East Asian Economic Integration, Vol. 19, No. 2 (June 2015) 117-142, Available at SSRN: https://ssrn.com/abstract=2627440

Sunghyun Henry Kim (Contact Author)

Sungkyunkwan University - Department of Economics ( email )

110-745 Seoul
Korea

Serge Shikher

U.S. International Trade Commission ( email )

500 E Street SW
Washington, DC 20436
United States

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