Infulence Of FTA Between China And South Korea On Agricultural Trade

Establishing bilateral Free Trade Agreements (FTA) has become the primarymethod of regional economic integration under the trend of increasing regionaland global economic integration. In2002, China and South Korea startednegotiations regarding establishing a FTA between China and South Korea. Inparticular, South Korea has been very sensitive to the topic of opening upagricultural sectors and intendes to exclude opening agricultural market.This paper investigates agricultural trade characteristics between China andSouth Korea using the IIT index, RCA index and TCD index, analyzingagricultural trade structure through a collection of Korea’s and China’sagricultural trade data. The primary effect from establishing a FTA towardagricultural products trade is a change to the tariff rates, which is dropped to0%in this paper’s GSIM model. Then, various factors are transformed into indicesand then calculated, analyzing the gain/loss of economic utility fromestablishing a FTA between South Korea and China based on producer surplus,consumer surplus, tariff revenue and net surplus. In result, establishing a FTA isbeneficial to China, on the other hand Korea is worse off by agreeing to the FTA.This paper predicts that the agricultural industry of South Korea will suffer considerable damage.Methods are also suggested to reduce the negative effectsassociated with FTA establishment (setting up a transition period of FTA,restriction on scale of agricultural market opening, founding a China and SouthKorea trade arbitration committee) and transforming industrial structure (thenecessity of fostering advanced agricultural human resourse).