Industrial Division Structure And Study On The Economic Impact Of Free Trade Agreement (FTA) Between South Korea And China

As the worldwide trend toward globalization makes itself eminent, various forms of free trade have emerged, especially in the form of emergence of bilateral and multilateral Free Trade Agreement among neighboring countries and nations with strong economic ties. After the Asian currency crisis, the number of regional trade agreements(RTAs) have increased rapidly within the East Asian Region. This study comprises a comprehensive investigation of the feasibility of bilateral Free Trade Agreement between Korea and china by comparatively analyzing both nations'economic scales, economic relations, economic structures, exchange rate trends and foreign currency reserves as explanatory variables. Furtherance of this FTA is expected to reach a new agreement stage through recent complex negotiations. The findings of this study give support to the enhancement of a good affinity of Korea's and China's relations for the near future.For the analysis perfomed in this study, quarterly statistical data form the IMF's statistical reports from 1998 through 2007 were used. Due to the difficulty in obtaining exact quarterly data on economic structure, for the years 2000 though 2006-7, yearly statistical data were used.Unit root testing of the variables was performed using the augmented Dickey-Fuller Unit-Root Test. The results of this study's independent variable in unit root testing revealed rejection of the null hypothesis on nearly all of the dependent variables. Thus, all of the variables appeared to fit in a secure time-series and were able to be tested with significance using linear regression(Probit Model) analysis.The deciding factors showing the need for a Korea-China FTA revealed in this study are as follows. First, with regards to economic scale, Korea's deciding factors include benefits for GDP and total exports, while benefits for total export and total imports are China's deciding factors. Second, from each country's respective economic standpoint, Korea's deciding factor for this FTA include import/export with China, while it was discovered from this study that China shows a negative correlation coefficient value for export but a positive correlation coefficient valve for imports toward Korea. Third, with regard to economic structure, commodity export are an important deciding factor for Korea, while important deciding factors in China include imports of goods and services in that the greater the increase in imports of goods and services the more difficult it will be to promote the China-Korea FTA. Ultimately, Korea and China both will need positive negotiations on expansion of trade for the success of this agreement.This study concludes that a Korea-China FTA would be a positive route for further development of trade between the two nations based on given economic variables and that furtherance of negotiations for this Free Trade Agreement are expected.