Analysis on the Effects of Korea-EU Free Trade Agreement (FTA) on Bilateral Trade Between Korea and EU

Abstract

On 1 July 2011, the Korea-EU Free Trade Agreement (FTA) entered into force. There were various predictions about how this FTA will affectthe Korea-EU bilateral trade balance. For South Korea, it wasnt the first time signing a Free Trade Agreement. However, it was the first time to cooperate bilaterally with the European Union, whose effects could not be easily predicted.

After a year, we are able to analyze the effects of the FTA on the bilateral trade of both sides and follow the trade trend changes.Most studies done on the potential impact of the Korea-EU FTA estimate that the agreement will have a small but positive effect on the economies of the EU and South Korea as a whole and that the larger relativeimpact would be on the South Korean economy. The greatest economic impact of the Korea-EU FTA would be on specific sectors in each economy which will be discussed in this paper.

From the perspective of European Union, there are high expectations of experiencing gains from the service sectors in the areas of financial services, transportation services, business services, retail and wholesale trade.

Furthermore, in terms of trade in goods, EU exporters of pharmaceuticals, auto parts, industrial machinery, electronics parts, and some agricultural goods and processed foods would be expected to gain from the FTAs implementation.

At the same time, the Korean side, especially manufacturers of cars, ships, wireless telecommunications devices, chemical products, and imaging equipment, expect to increase their exports to the EU market.

This paper is going to overview how the Korea-EU FTA has affected on Korea EU in terms of their bilateral trade. As far as the results show, the bilateral trade in automobile sector has had mostly been affected by the Korea-EU FTA.