Korea Trade Review (무역학회지)

Korea Trade Research Association (한국무역학회)
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Analysis of Korea-Canada FTA's export effect

한-캐나다 FTA 수출효과 분석

  • Kyung-Yun Yeom (National Tax Service Sejong District Office) ;
  • Ki-Baeg Park (The Graduate School of Science in Taxation, University of Seoul)
  • Received : 2020.06.05
  • Accepted : 2020.08.24
  • Published : 2020.08.31
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Abstract

This study aims to analyze the export effects of Korea-Canada FTA's tariff reduction, which was launched on January 1, 2015. First, as a groundwork, this study reviewed trade creation and trade diversion by investigating all possible cases of both initial FTA and additional FTA. The review was done by using the simple model of three countries assuming FTA means elimination of tariff. The review suggested that additional FTA doesn't have any negative impact on import country's social welfare contrary to initial FTA. In additional FTA, Trade diversion could happen between FTA partner countries, but it always increases import country's social welfare. In this sense, it can be called favorable trade diversion. Second, this study analyzed the export effects of Korea-Canada FTA using Clausing's product level model based on Canadian government import data from Korea which is not open to the public. It turned out that Korea-Canada FTA's tariff reduction boosted Canadian import growth rate from Korea. On the other hand, Canadian import growth rate from rest of the world was not negatively affected by Korea-Canada FTA's tariff reduction. Rather, it increased as Canadian import growth rate from Korea was higher. These findings implied trade creation rather than trade diversion of Korea-Canada FTA when it comes to Korea's export to Canada.

Keywords

References

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