A Study On The Trade Effect Of South Korea’s Regional Trade Agreement

The global economy is currently on the rise with two trends: globalization and regional economic integration.Especially,it is rapidly expanding around the Free Trade Agreement（FTA）.Korea has also benefited greatly from the multilateral trade system represented by the GATT / WTO for the past 50 years and participated in the regionalism trend before and after the start of the FTA with Chile in 1999.Since then,in response to changes in the global economic order,where regionalism is prevalent,the Korean government has set up an FTA roadmap containing the negotiation target and strategies of FTA in 2003 and conducted a series of negotiations at the same time.In other words,Korea is actively entering the trade market in various ways.Free trade agreement is a legally binding contract between two or more countries.Its purpose is to promote economic integration.One of its goals is to eliminate trade barriers and allow free flow of goods and services between countries.The trade barriers mentioned here may be tariffs,complicated rules and so on.Korea is also trying to make more contracts with other countries.In this context,Korea is expected to secure price competitiveness in the world market and to increase the trade volume between two countries due to the FTA.The purpose of this paper is: first,through the analysis of the trade situation between South Korea and the major trading countries,to investigate what are the important factors in South Korea’s trade,mainly taking the bilateral FTA signed by South Korea and the economies（ASEAN,EFTA,EU）as the center,to estimate the general trade trends and changes between the two sides;second,in the existing gravity model,from the Based on the distance,population,language and other dimensions,this paper analyzes the role of ASEAN and EU members in trade with South Korea;thirdly,it analyzes whether the FTA signed by South Korea recently has trade creation effect and how to improve the content of FTA based on the actual situation of South Korea’s trade,so as to promote the further development of South Korea’s foreign trade.In order to achieve the above research purposes,this paper consists of the following parts:Chapter 1,as the introduction of the paper,first describes the research background and significance of this paper,and combs the research ideas and framework structure,at the same time explains the research methods and purposes,and finally points out the innovation and deficiency of the research.Chapter 2 firstly reviews and sorts out the previous studies on regional trade agreements,and points out the relationship between regional trade agreements and trade through these previous studies;then,it comprehensively reviews and summarizes the gravity model related research in trade theory,which paves the way for the empirical research in the following part.In the third chapter,the author summarizes the relevant theories on the relationship between regional trade agreements and Trade: customs union theory,free trade area theory,big market theory,agreement international division of labor theory,spokes axle theory.On this basis,this paper summarizes the theoretical mechanism and empirical experience of the impact of regional trade agreements on trade,and as the theoretical support and empirical reference of this paper.Chapter 4 describes the current situation of South Korea’s regional trade agreement under the framework of WTO,and on this basis,analyzes the trade development between South Korea and ASEAN,European Free Trade Association,European Union,the United States and China after the signing of regional trade agreements.In Chapter 5,on the basis of gravity model theory,this paper puts forward the empirical research model and method,and explains the relevant variables and data sources in the model.At the same time,based on the given econometric model,this paper empirically analyzes the impact of the regional trade agreements signed by the 30 countries with South Korea on South Korea’s trade,and explains the reasons for the impact.In Chapter 6,on the basis of the previous research,this chapter discusses the tradee ffect of South Korea’s bilateral FTA by taking China South Korea FTA as an example,and analyzes in detail the positive performance and existing problems of bilateral trade between China and South Korea under the background of China South Korea FTA,as well as how to improve the FTA to promote the improvement of problems,so as to make the trade between China and South Korea to develop continuously and healthily in the future.In addition,the conclusion of this chapter also provides reference for the conclusion of FTA between South Korea and other countries and regions,as well as the strategic layout of South Korea’s global FTA,which has great practical significance.In Chapter 7,firstly,it discusses how to accelerate the strategic layout of FTA in South Korea;Secondly,the paper clarifies the main reasons for South Korea to promote FTA strategy,such as the need to achieve economic development goals,an important way to expand trade,an important measure to increase employment and achieve industrial upgrading;Once again,it states the impact of South Korea’s FTA strategy.In Chapter 8,according to the analysis of the empirical results,this paper draws the conclusion of this paper,and on the basis of the conclusion,puts forward relevant policy suggestions to promote the further development of South Korea’s trade.In this paper,we analyzed the factors affecting the trade volume of Korea.In particular,the analysis of GDP and the influence of the distance,which we believe fundamentally influences the volume of trade,especially the influence of the regional trade agreement in Korea,was analyzed using the gravity model.We used panel data analysis method using Pooled OLS（PE）,Fixed Effect Model（FE）,and Random Effects Model（RE）.The Eviews—8 and SPSS 22.0 programs were used as the statistical programs for the processing and analysis of the collected data.We also use the multiple regression analysis to analyze the effect of each variable on the import and export trade volume Korea to achieve the objective of the study.The results of analysis are summarized as follows using the multiple regression analysis for the gravity model of import and export trade volume of RTA and FTA.First,in all models,the coefficient of GNP variable shows a positive result,which shows a positive value of 0.05 in statistics.The results show that the larger the market size of a country,the larger the total volume of trade with other countries.On the contrary,the coefficient of distance variable is negative.This shows that with the increase of the distance between the two countries,the trade volume decreases,that is,the trade volume is inversely proportional to the geographical distance between the two countries.At the same time,in the gravity model,distance means the increase of transportation cost and transportation time in trade;Second,By observing the joint economic parameters,this paper examines the impact of regional economy on the trade scale of South Korea.For example,the trade effect between South Korea and ASEAN shows a positive value of 0.01 in the mixed regression model,but in the total trade volume with the EU and the European Free Trade Union,this parameter shows a negative value,which indicates that the EU and the European free trade union agreement will also restrain South Korea’s trade.Third,it was analyzed that in the Fixed Effect Model（FE）,in the case of EFTA,the FTA with these regions have a positive effect on Korea’s trade volume at the statistical significance level of 0.01.On the other hand,the treaty between EU and ASEAN were found to negatively affect Korea’s trade volume in these regions,the EU does not have a significant effect on trade and the ASEAN is not statistically significant.Fourth,In the Random Effect model（RE）,EFTA shows that the agreement has the effect of expanding Korea’s trade.In the case of the EU and ASEAN,negative（—）effects were observed,while the EU was at the significance level of 0.1 and ASEAN was not statistically significant.Fifth,the existing problems in trade between China and South Korea can be solved by improving the FTA level of both sides.The improvement contents include reducing trade friction through adjusting trade structure,improving the trade cooperation mechanism between China and South Korea,gradually transforming the import and export commodity structure to advanced level,strengthening the exchange of information,increasing bilateral investment,improving the investment environment,and enhancing the added value of products.At the same time,these countermeasures also have important reference value for South Korea to improve its trade agreements with other countries.In future research,TPP and RCEP will be added to study the impacts of Korea’s import and export trade volume.It is expected to have implications for Korean governments and companies.Although the results of this study are not a high level of completion,we hope that the analysis presented in this study may provide a small reference point for future studies in the related fields and research related to this study will become more active.