The Feasibility And Economical Effect About Establishing China And South Korea FTA

With the development of economic globalization, the communication between country and country get into a new stage, when multilateral negotiations have barriers not to continue, bilateral cooperation especially the establish of FTA become a subprime choice, which also become one of the world's current economic characteristic. China is the world's largest developing country,whose achievement is outstanding, the domestic has broad market potention. South Korea is a new industrial countries, whose surpassing ability and innovation ability are world class. Since the two countries restored in 1992, economic and trade relations is more and more tightening and mutual investment keep increasing,so conforming to the trend, FTA between China and South Korea is the best choice, which is good for the regional division of labor and the resource allocation.The Establishment of China and South Korea free trade area can be an effective way to construct production network, to speed up the international flow of the elements of production between the two countries, and to promote the development of the economy, which is beneficial to the welfare increasing between the two countries. At the same time, this is also great to the development of northeast Asia economic integration. After the 2008 international financial crisis, the two countries know that strengthening regional cooperation is important clearly. After five joint reasearch conferences China and South Korea free trade area have ended the officer with the combination of production and learning stage in May 28,2010. Next the two sides will exchange views and strive for starting negotiation early. Although establishment of FTA is full of difficult, it is still constantly in advance.This paper is based on the previous research results and the classical theory in economics, combining the current world economic situation and the latest data. It is full of dialectical thinking about constructing the FTA between China and South Korea to analyze a series of problems, mainly including the feasibility and economic effect. There are six part,including six chapters.The first part of this paper study the background and significance, the current situation at home and abroad, research methods and content structure.The second part construct the theoretical framework about China and South Korea free trade area to support the back study through the comparative advantage theory, factor endowments theory, customs union theory and the Intra-industry trade theory.The third part is the feasibility of China and South Korea free trade area. Firstly, the latest data reveals the trade present situation between China and South Korea, which is also summarized about characteristics to point out problems. From that we know trade imbalance is exist, but due to the strong complementarity industry, so the foundation of FTA is built. Secondly, we list real data of bilateral investment, and point out that the investment of South Korea to China holds a large proportion of foreign capital to china, but China holds a small proportion to South Korea about investment. Finally, according to the above analysis, through the review process of building FTA between China and South Korea, we point out the advantages and disadvantages of establishment FTA and analyze the feasibility.The fourth part analyze the economic effects of China and South Korea free trade area according to the customs union theory, including static effect and dynamic effects. At the same time, according to the intra-industry trade theory, we make an empirical analysis about the tops of the products about China and South Korea using the index of industry inner trade to import and export, to retell the conclusion about trade between China and South Korea in the third part and to deepen.The fifth part is a comparison between China-South Korea FTA and America-South Korea FTA, through the two countries with the south Korean in trade, investment and tariff barriers, result that two free trade areas exist certain similarities in the feasibility and economical effect, so the experience of America-South Korea FTA may be a reference to the negotiations of China-South Korea FTA.The sixth part designs a way to the establishment of China-South Korea FTA from theory and practice according to the analysis of the above five parts and puts forward to some reasonable Suggestions.