Over the last twenty years South Korea has signed several free trade agreements, including one with the U.S. in 2007 and one with the E.U. in 2010, which include tariff reductions. This thesis examines the impact of tariff reductions through free trade agreements on the value of imports of a single product representative for the agricultural sector through several regression analyses using a Poisson pseudo maximum likelihood estimator.
Besides the two exporters of interest, the European Union and the United States, Canada, Mexico, Chile and Australia complement the data set as reference value. This study starts with a literature review on existing literature on the two free trade agreements and the effects of free trade on the agricultural economy. In chapter three an independent investigation is conducted explaining the background to the two free trade agreements and, more generally, the effects of trade liberalization on the agricultural sector. The following chapter describes the course of the investigation with the explanation of the operational variables and the data using descriptive statistics. The data is used in an estimation model to evaluate the effect of a reduction of tariff rates according to an agreement on the value of imports. The individual components of the estimation model are explained in more detail, followed by a presentation of the results of the estimation using the STATA statistics program. The last chapter concludes the whole investigation, together with considerations on possible further studies of this topic.
Table of Contents
1. Content
1.1 Introduction
1.2 Literature Review
1.3 Background
1.3.1 KORUS FTA
1.3.2 KOREU FTA
1.3.3 Impacts of Free Trade Agreements on Korea's Agricultural Sector
1.4 Data Description
1.4.1 Definition of Operational Variables
1.4.2 Descriptive Statistics
1.5 Empirical Model
1.5.1 Poisson Pseudo Maximum Likelihood estimator
1.5.2 Fixed Effects
1.6 Results
1.7 Conclusion
Research Objectives and Themes
The primary research objective is to examine whether the Free Trade Agreements between South Korea and the United States (KORUS FTA) and between South Korea and the European Union (KOREU FTA) have led to a statistically significant increase in the import value of specific agricultural products (meat of swine) in South Korea.
- Analysis of trade liberalization impacts on the South Korean agricultural sector.
- Application of the Poisson pseudo maximum likelihood (PPML) estimator in gravity models.
- Comparison of trade outcomes between the KORUS and KOREU agreements.
- Identification of determinants influencing agricultural trade flows using panel data.
Excerpt from the Book
1.1 Introduction
Trade liberalisation has seen an enormous development since World War II. A starting point of this development was the signing of the General Agreements of Tariff & Trade (GATT) in 1947 (Caliendo et al., 2016 cited in Bureau J.C. et al.,2019). Trade Liberalisation has been progressed by regionalism and bilateralism in the last 25 years. This increased the number of activated Regional Trade Agreements to 490 in 2020 (World Trade Organisation, 2020). One of the countries that have benefited most from trade liberalisation was South Korea (henceforth, also Republic of Korea or Korea) (Yoo C. K. et al., 2012). As a result, the Republic of Korea has developed from an underdeveloped country to a middle-income economy since the 1970s (Yoo C. K. et al., 2012) with above-average economic growth compared to the Organisation for Economic Cooperation and Development (henceforth OECD) average in the last years (Organisation for Economic Co-operation and Development, 2018). As South Korea is ranked as one of the top 10 countries with the highest value of trade flows in the world (Table 4), the agricultural sector has been highly protected by trade restrictions and governmental subsidies (Walker A., 2015). Yet, South Korea was a net importer for agricultural products at the beginning of the 21st century (Yoo C. K. et al., 2012) and had a high trading deficit in the farming sector (Yoo C. K. et al., 2012; Sakamoto K. et al., 2007).
Considering the growing importance of Regional Trade Agreements, Korean governments aim to build in the long-term a "web of FTAs, with South Korea at the center" (Cooper W.H. et al., 2011b, p.3). Free Trade Agreements (henceforth FTAs) are mentioned to be a positive initiator for multilateral trade (Freud, 2000 and Ornelas, 2005 cited in Sun L. and Reed M.R., 2010). At the same time, Koo W.W. et al. (2006) different empirical papers emphasise the positive impact of signing a Free Trade Agreement for agricultural trade. South Korea has concluded 14 trade agreements between 2004 and 2018 (Hopkinson J., 2018), including the Free Trade Agreements with the United States of America (henceforth KORUS FTA), which has been entered into force in 2012, and the European Union (henceforth KOREU FTA) in 2011 (World Trade Organisation, 2020a).
Summary of Chapters
1.1 Introduction: Provides an overview of global trade liberalisation trends and South Korea’s specific position, introducing the research question regarding KORUS and KOREU FTAs.
1.2 Literature Review: Summarizes previous empirical studies concerning the effects of trade agreements on South Korea’s agricultural and meat imports.
1.3 Background: Details the historical context of South Korean trade strategy, specifically focusing on the motivations and provisions of the KORUS and KOREU FTAs.
1.4 Data Description: Explains the variables used in the regression model, including monetary values, tariff rates, and macroeconomic indicators, and presents descriptive statistics.
1.5 Empirical Model: Describes the methodology, specifically justifying the use of the Poisson pseudo maximum likelihood (PPML) estimator and country-pair fixed effects.
1.6 Results: Presents and discusses the findings of the regression analyses, evaluating the statistical significance of tariff reductions on import values.
1.7 Conclusion: Summarizes the thesis findings, noting that no significant effect of tariff reductions on the import value of the analyzed agricultural product was identified.
Keywords
Free Trade Agreement, KORUS FTA, KOREU FTA, South Korea, agricultural sector, trade liberalisation, Poisson pseudo maximum likelihood, gravity model, tariff reduction, meat of swine, import value, panel data, trade creation, trade diversion, fixed effects.
Frequently Asked Questions
What is the fundamental focus of this research?
The work focuses on analyzing the impact of two major Free Trade Agreements—the KORUS FTA and the KOREU FTA—on the import value of pork (meat of swine) in South Korea.
What are the primary thematic fields covered?
The thesis covers international trade policy, agricultural economics, econometrics, and the specific analysis of regional trade agreements and their economic effects.
What is the core research question?
The research asks whether the implementation of the KORUS and KOREU FTAs led to a statistically significant increase in imports within the South Korean agricultural sector, specifically focusing on pork imports.
Which scientific methods are applied?
The study employs a quantitative approach using a gravity model estimated via the Poisson pseudo maximum likelihood (PPML) method, including country-specific fixed effects to control for heterogeneity.
What topics are discussed in the main part?
The main part encompasses a literature review, an historical background of Korean trade strategy, a detailed description of operational variables and data, and the empirical modeling and presentation of regression results.
Which keywords best characterize the work?
Key terms include Free Trade Agreement, South Korea, agricultural trade, PPML estimator, tariff reductions, and gravity model.
Why was the product "meat of swine" (pork) specifically chosen for this analysis?
Pork was selected because its consumption is linked to rising income levels and macroeconomic conditions in South Korea, providing a representative product for the agricultural sector to measure tariff impacts.
What was the main finding regarding the impact of tariff reductions?
The regression analysis suggests that tariff reductions did not have a statistically significant effect on the monetary value of pork imports from the United States or the European Union during the studied period.
- Citar trabajo
- Alexander Schmid (Autor), 2020, The Impact of Free Trade Agreements on Trade in Goods in the Agricultural Sector of the Republic of Korea. The KORUS FTA and the KOREU FTA, Múnich, GRIN Verlag, https://www.grin.com/document/974672
