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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. Jin Suk Park & Eunju Hwang, 2023. "Sectoral FTA gains, conflicts, and the role of interindustry factor mobility: Evidence from Korea's free trade agreement," Pacific Economic Review, Wiley Blackwell, vol. 28(1), pages 97-123, February.
    2. Botezatu, Elena, 2007. "EU – ASEAN free trade area: regional cooperation for global competitiveness," MPRA Paper 4946, University Library of Munich, Germany.
    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. Pei‐Yu Chi & Ting‐Yu Chang & Kuo‐I Chang, 2022. "Evaluating the impact of preferential trade agreement on fishery imports: An application of difference‐in‐differences with matching method," Agricultural Economics, International Association of Agricultural Economists, vol. 53(1), pages 90-124, January.
    5. Beyhan Bektasoglu & Tanja Engelbert & Martina Brockmeier, 2017. "The Effect of Aggregation Bias: An NTB-modelling Analysis of Turkey's Agro-food Trade with the EU," The World Economy, Wiley Blackwell, vol. 40(10), pages 2255-2276, October.
    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.
    7. Julia Grübler & Oliver Reiter, 2020. "Non-tariff Trade Policy Analysis: An Ex-post Assessment of the EU-Korea Agreement," wiiw Working Papers 182, The Vienna Institute for International Economic Studies, wiiw.
    8. Joseph Francois & Miriam Manchin, 2009. "Economic Impact of a Potential Free Trade Agreement (FTA) Between the European Union and the Commonwealth of Independent States," IIDE Discussion Papers 20090805, Institue for International and Development Economics.
    9. Pierre Kohler & Servaas Storm, 2016. "CETA Without Blinders: How Cutting ‘Trade Costs and More’ Will Cause Unemployment, Inequality and Welfare Losses," GDAE Working Papers 16-03, GDAE, Tufts University.
    10. Konstantin KHOLODILIN & Tanja FENDEL, 2008. "Economic Impact of a Potential FTA Between EU and ASEAN on the German Economy," EcoMod2008 23800060, EcoMod.

    More about this item

    Keywords

    CGE; EU-Korea Free Trade Area; GTAP;
    All these keywords.

    JEL classification:

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

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