Korea Fta Case Study

Clara Lee

November 5th

Korea and China FTA For few years of negotiations, China and Korea had finally set up a free trade agreement. The agreement had finalized in November of 2014, and as part of the deal, both country are eventually eliminating 90 percent of tariffs on the goods traded between China and South Korea. In my opinion, I think Korea and China FTA is a beneficial thing for both countries, because since both countries have comparative advantage on certain goods, they can import products that they don’t really have a lot in their countries, and they can export products that they have a lot but the other countries don’t have much.

In FTA between two countries, it is usually true that whichever country that has greater influence

Until the early 1990s, South Korea was becoming more industrialized, and it had comparative advantage in any manufacturing that needs specific technology. This could also mean that Korea had comparative advantage in electronics, heavy machinery, and other technological goods to China. However, China’s rapid growth has made it possible to transcend the comparative advantage that South Korea had in low-technology places. However, China has lost its comparative advantage in high labor - required industries because Korea also had been rapidly catching up. In Jung Taik Hyun and Jin Yong Hong’s study conducted in 2011, “Comparison of Comparative Advantage of Korea and China by Technology Level,” it is proven that South Korea has maintained a comparative advantage in high and medium-high technology products over

However, China still has an advantage on Korea because most of its equipment and materials are made in China. In a lot of products that we use in Korea, we easily see “made in china” sign. The products made in china is their comparative advantage because they get access and make more goods and export them, which Korea doesn't necessarily have cheap labor to do so. For example $28.4 billion of electronic equipment, $10.5 billion of machines, engines, pumps, $8.9 billion of iron and steel, $4.1 billion of medical and technical equipment, $3.5 billion of products made out of iron and steel, $2.6 billion of organic chemicals, $2.3 billion of clothing, $2.1 billion of plastic, $2 billion of inorganic chemical, and $1.7 billion worth of of furniture, lighting and signs are being imported to