A Study On The Feasibility Of Korea And China FTA And Its Corresponding Policy

Korea and China are the two most vigorous economies in East Asia and both are accelerating the FTA process. The FTA with China is a main issue of economic cooperation in order to confront soaring Chinese competitiveness in international markets. A Korea and China FTA will allow Korea easy access to a huge market and reduce the one-sided safeguards of the Chinese government, which will in turn improve Korea’s balance of trade, In addition, it is expected that the economic growth of China can play an important role in Korea’s economic growth through a high degree of specialization of industry structure, and improvement of efficiency of investment toward China.The purpose of this paper is to investigate the structure of trade and its competitiveness of Korea and China, and compares each other. More specifically, it analyzes industrial structure of comparative advantage, competitiveness and complementarities between Korea and Chinese products, using the export share of each country in the world market, revealed comparative advantage (RCA) index and trade specialization index (TSI). In this analysis, Korea is relatively competitive in transport equipment, IT&consumer electronics, textiles, chemicals, and electronic components etc., while China is relatively competitive in clothing, leather products, miscellaneous manufacturing, processed food and fresh food etc. In the near future, Korea and China might have keen competition in IT&consumer electronics and textile industries. This paper also evaluates the benefits and some problems caused when concluding FTA between two countries and then propose the corresponding policy measures of Korea in preparation for Korea-China FTA.