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GTAP Resource #3768

"The impact of EU-Korea FTA on Chinas economic and trade: Based on the Dynamic GTAP model "
by Yu, Liu, Wanlu Dong, Yaxiong Zhang and Cai Songfeng

EU-Korea FTA will come into effect in July 2011.European Union and South Korea are respectively Chinas first and third largest trading partner. Therefore, the EU-Korea FTA will have an important impact on Chinas economy and trade. Based on the dynamic GTAP model and the latest GTAP database version 7, According to the EU-Korea Free Trade Agreement, in 3 years EU will reduce product tariff by 96%, Korea 99%. In 5 years, both countries will cancel bilateral industrial product tariff. We also assume EU and Korea’ tariff system with other countries unchanged. This paper analyses the economic impact of the full realization of EU-Korea FTA in 2015 on Chinas macro economy and the various industrial sectors. The results show that there is a negative impact on Chinas overall economy, but the magnitude is very small with only-0.007%. Compared with exports, imports fall more sharply, so China’s trade balance has improved. From the view of output, Chinas agricultural products, agricultural products’ processing industry and service sectors will suffer negative impact, while there is a certain role in promoting Chinas industrial sectors. From the view of regional product trade, the implementation of the EU-Korea FTA has a obvious diversion effect on China import and export trade, and China will be more inclined to export to EU market than Korean market. In contrast, there is a trend that the demand of importing China’s agricultural products and processed products will transfer from the EU to South Korea, which to a certain extent, form a export substitution of South Korean to the EU .Finally, some policy implications are discussed....

Resource Details (Export Citation) GTAP Keywords
Category: 2012 Conference Paper
Status: Published
By/In: Presented at the 15th Annual Conference on Global Economic Analysis, Geneva, Switzerland
Date: 2012
Created: Yu, L. (3/15/2012)
Updated: Yu, L. (3/15/2012)
Visits: 1,636
- Economic growth
- Dynamic modeling
- Asia (East)
- North America

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