• Journal of Korea Trade
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• v.24 no.2
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• pp.53-67
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• 2020

Purpose - The purpose of this paper is to study strategic trade policies under international process research and development (R&D) competition with or without market leaders for free trade and a subsidy regime and compare the effects of R&D subsidies and export subsidies on the equilibrium levels of firm profit and social welfare. Design/methodology - For the analysis, we use previous work by Haaland and Kind (2008) and construct a differentiated goods duopoly model, wherein two firms compete via quantity in a third-country market for free trade and the subsidy regime. We consider simultaneous-move quantity competition when the two firms choose their quantities simultaneously and sequential-move quantity competition when they choose their quantities sequentially. The results are compared to those of Balboa, Daughety and Reinganum (2004), who studied export subsidies. Findings - The following are the findings. First, the results of firm preference orderings regarding firm position from Dowrick (1986) and Balboa, Daughety and Reinganum (2004) may not hold in our model when the firms' strategies are strategic substitutes under free trade. Second, the preference rankings under Cournot competition for free trade and a subsidy regime are the same as those in the strategic trade policy of export subsidy. Third, except for the cases of too close substitutes and complements, the results of firm and government preferences regarding firm position are different from those of Balboa, Daughety and Reinganum (2004) in that Stackelberg leadership in a subsidy regime is advantageous when the goods are substitutes but is disadvantageous when the goods are complements. Moreover, the equilibrium level of firm profit is the highest in the Cournot-Nash play when the goods are substitutes in a subsidy regime. Fourth, except for the cases of too close substitutes and complements, the results of firms' and their respective governments' trade regime preferences are similar to those of Balboa, Daughety and Reinganum (2004) in that a Stackelberg leader firm and government prefer free trade if the goods are substitutes and prefer a subsidy regime if the goods are complements. Furthermore, a Stackelberg follower firm and government strongly prefer a subsidy regime to free trade. Originality/value - By analyzing the effects of R&D subsidies and export subsidies in international markets, we can find similarities and differences between them in international markets.

• Journal of Korea Trade
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• v.25 no.6
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• pp.105-125
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• 2021

Purpose - This study analyzes the effects that the response to the technical barriers to trade (TBT), which are used by various countries as means to restrict imports, exerts on exports at a time when protectionism is emerging in the face of a global economic downturn. TBT has been widely used in developed countries for the safety and protection of their people. Recently, the use of TBT as a tool of protectionism has increased considerably in developing countries as well. Therefore, this study analyzes the South Korean SMEs' response and export performance. Design/methodology - To analyze SMEs' response to TBT and their export performance, this study conducted empirical analysis through statistical analysis. To this end, the research established a theory based on previous research and designed its hypothesis and research model. To verify the hypothesis and research model, factor analysis addressing validity and reliability was performed using SPSS 25 and AMOS 26, and the structural equation model was analyzed. Findings - This study found the causal relationship between the independent variable, the mediating variable, and the dependent variable adopted against the theoretical background to have little or no effect, in contrast with previous studies. In a break from previous studies, all hypotheses were rejected for innovation strategic competencies, one of the sub-factors of the independent variable, which is believed to be a result of the lack of practical research related to TBT. Originality/value - Previous studies performed analysis using trade statistics or macro data. A number of such studies analyzed the relationship between technical regulation and trade volume. This study differs from previous studies in some respects, because it analyzed the export performance of companies by establishing a hypothesis and implementing a research model with the factors analyzed in previous studies. In addition, a new attempt has been made by classifying the TBT response factors into technology competencies, human resource competencies, and innovation strategic competencies, and utilizing technology innovation and the export support system as mediating effects.

• Journal of Korea Trade
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• v.23 no.2
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• pp.88-109
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• 2019

Purpose - This paper examines the effects of host country's non-economic factors on foreign affiliate's financial and operational performance. Design/Methodology - Using Korean-owned foreign affiliate-level data, we employ various measures that represent host country's non-economic factors and examine their effects on foreign affiliate's performance. We further investigate the effects of local top managers and local middle managers on the impact of country's non-economic factors on foreign affiliate's performance. Findings - We find that local top managers are effective in increasing foreign affiliate's financial performance by dealing with institutional and cultural factors, particularly in high-income countries, while local middle managers are effective in increasing affiliate's operational performance by responding to the changes in doing business factors, particularly in low-income countries. Originality/value - Considering that most of previous FDI studies focus on examining host country's economic factors on firm's FDI decision, our findings suggest that country's non-economic factors are strongly associated with actual business performance of foreign affiliates.

• Journal of Korea Trade
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• v.24 no.4
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• pp.18-33
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• 2020

Purpose - This paper investigated the effect of international trade affects income inequality. It also compares the different effects between developing and developed countries over the period from 2005 to 2014 for 58 countries. Design/methodology - The econometric estimation was used to identify the relationship between export, import, FDI, GDP, unemployment and income inequality. In this empirical analysis, we utilized a Vector Error Correction (VEC) model using panel data. Findings - The findings show that there is a close correlated between trade and income inequality. The higher export ratio of GDP tends to have a 1.79 times more income inequality in developing countries than in developed countries. The higher import ratio of GDP tends to have a 2.44 times higher income inequality in developing countries than in developed countries. Further, Increasing FDI tend to have an approximately 1.43 times higher income inequality in developing countries than in developed countries. Korea is in the middle of developed and developing countries' result. Originality/value - To correct the global income inequality regarding trade, developed countries' proactive trade policies, such as granting preferential tariff benefits to developing countries, are likely to be needed and Income Safety Net in international trade must be taken into account.

• International Commerce and Information Review
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• v.12 no.4
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• pp.151-170
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• 2010

The present study made an empirical analysis for investigating the competitiveness of technology trades in Korea. In particular, the study deduced the correlation between technology export and technology import using the variables of Gross Domestic Expenditure on R&D and Per capita industry value added Productivity and employed fixed effect model in panel linear regression model. It is found that the R&D expenditure of OECD countries made a significant effect on the technology import and the value-added labor productivity made a significant result on both technology export and import. Therefore, it showed that the technology trade in Korea made a sensitive response to labor productivity in OECD countries. By panel analysis, machine, construction, ICT, and service industry affect most on technology export in Korea for recent 5 years. For technology import, electric-electron, chemical, service, and construction industry have significant effects. This study contributed to understanding of industrial characteristics affecting technology trades in Korea and empirical analysis to show correlation between the factors affecting technology trade.

• Korea Trade Review
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• v.44 no.1
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• pp.115-127
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• 2019

In recent years, the Indian market has gained worldwide attention in the global trading business environment. Korean companies are also seeking to enter the indian market, and their foreign trade investment strategy is based on the Global Value Chain(GVC). In this study, we examine difference from traditional investment strategy to GVC investment strategy in the age of 4IR(fourth industrial revolution) through using POLS model(pooled least square), FEM(fixed effect model), and REM(randomized effect model). Based on the analysis of 84 monthly data related to the FDI and international trade effects between Korea and India, the following results were found. As Korean companies increased their share of export to the Indian market and export to the Indian market, the number of new companies directly invested in overseas market increased. However, the amount of import into the Indian market was relatively low in relation to the number of new companies directly in overseas markets. As a result of analyzing the investment strategy of the GVC in India, the GVC has shifted from manufacturing to process upgrading to enter the GVC on Smile Curve.

• Korea Trade Review
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• v.44 no.4
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• pp.205-220
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• 2019

This article recapitulates the recent changes in trade laws, which may be accentuated due to the intriguing emergence of fortified protectionism and Mega FTAs. It points out the need to formulate not only the corporate strategy for enhancing the product differentiation and architectural capabilities but also the public policy, which comprises the industrial adjustment policy to cope with possible negative impulses caused by the digital trade and foreign direct investment. It is imperative for Korea to facilitate the alignment between corporate strategy and industrial adjustment policy as an effective means of enhancing industrial structure by nurturing those linkage effects between relevant forward and backward industries. Given the drastically volatile trade norms of multi-track trade policies, it may be a pivotal momentum for Korea to pursue a paradigm shift of its trade policy with a prime objective of achieving such an alignment between corporate strategy and industrial adjustment policy, which affords increased value-added and the further development of product or generic technology instead of resorting to the misuses and abuses of economies of scale and production technology for the maximization of export amount.

• East Asian Economic Review
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• v.25 no.1
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• pp.33-71
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• 2021

Many different approaches and databases have been developed for the evaluation of non-tariff measures (NTMs) and free trade agreements (FTAs). This paper is devoted to the EU-South Korea agreement, which is the first 'second-generation' FTA of the EU, addressing a wide array of non-tariff policies. We review the evolution of NTM types applicable to the EU-South Korea trade relationship and the role of NTMs in ex-ante and ex-post analyses of the agreement. Subsequently a structural gravity model is employed to assess the value added of information on different aspects of FTAs and types of NTMs by evaluating their ability to predict the trade effects of the EU-South Korea FTA. Our results show that, when accounting for information on the components common in modern deep trade agreements, no additional trade effect is attributable to the EU-South Korea FTA. The evolution of NTMs differs considerably across indicators used, but trade predictions are hardly affected. Most specifications point towards a negative effect of bilateral differences in the number of technical barriers to trade (TBT) applied and sanitary and phytosanitary measures (SPS) against which trading partners issued complaints at the WTO.

• Journal of Korea Trade
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• v.26 no.6
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• pp.41-60
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• 2022

Purpose - The policy implications of free trade agreements have traditionally been a matter of debate among economists. The official signing of the Korea-China Free Trade Agreement provides economists with a quasi-natural experiment to analyze the FTA's policy effects. This article aims to more accurately understand the impact of Korea's FTA accession on the macro economy. Design/methodology - This study adopts the counterfactual method based on panel data to find common factors in the generation process of macro data to fit the counterfactual path, to accurately evaluate the effect of the macro policy. Findings - Our research results show that the signing of the Korea-China FTA has a relatively significant short-term positive effect on Korea's economic growth. On average, Korea's real GDP growth rate has increased by 2.1%. This study finds evidence in support of FTA signing not having a significant impact on Korea's GDP growth in the long run. Additionally, we evaluated the impact of the FTA on Korea's imports and exports and found that it had a significant positive impact in the short term, but the trade effect of the FTA is significantly affected by the external macro-environment. Originality/value - First, this study uses macro panel data at the national level to examine the impact of the Korea-China FTA on Korea, and more accurately describes the policy effect of the FTA. Second, our empirical results show that the Korea-China FTA policy impact is subject to occasional changes in the external environment, such as the geopolitical conflict (crisis) between Korea and China, and the US-China trade war. Finally, the analysis shows that the short-term effect of FTA is significant but the long-term is uncertain, which provides empirical evidence for the debate on whether joining FTA can promote national economic growth.

• Journal of Korea Trade
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• v.23 no.4
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• pp.30-57
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• 2019

Purpose - This study analyzes the effect of internationalization represented as exporting on firm performance on the subject of SMEs operating in Masan Free Trade Zone which has shown poor performance recently despite its status as the oldest and largest free trade zone in Korea. We also analyze the effect of firm size on firm performance, and the moderating role of firm size in relation to internationalization and firm performance. Design/methodology - This study uses multiple regression models for unbalanced panel data as the empirical tools for the estimation of the effect that internationalization has on firm performance (ROA or ROS). Our sample consists of 91 manufacturing SMEs among all 110 companies located in Masan Free Trade Zone as of 2017. Findings - The degree of internationalization has a negative impact on firm performance. However, firm size turns out to have a positive effect and play a positive moderating role in the relation to internationalization and firm performance. This seems to be because most tenant companies operating in Masan Free Trade Zone are small firms whose costs of internationalization may exceed the benefits. Empirical results also show that longer CEO tenure has a greater negative effect on firm performance. Originality/value - The originality/value of this paper can be found in 3 aspects. First, we conducted an empirical analysis on the relationship between the internationalization and firm performance of SMEs in a specific region, namely, Masan Free Trade Zone. Second, while most previous studies focused on listed medium companies, most of the sample of this study are small and medium non-listed enterprises. Third, it is witnessed that firm size has a positive moderating effect on the relation between internationalization and firm performance.