An Empirical Analysis of the Impact of the Establishment of China-Korea FTA on Bilateral Trade

This paper, based upon partial equilibrium, establishes a global simulation model to predict the trade flow effect of tariff cutting between China and South Korea at the industry level. The result shows that on the basis of having established Korea-US FTA, if China and Korea do not reach agreement on FTA, part of the trade between China and Korea will be replaced by the trade between US and Korea as a result of the effect of trade diversion. China-Korea FTA will benefit both countries in exerting their competitive advantages.