Study On The Effect Of FTA In China And Korea

The starting point of this paper is to ask questions of the impact of the China-Korea FTA to iron and steel products between China and Korea. Because the iron and steel industry is one of the industry widely implication in other industries, so choose it as the analysis object.The analysis has three purposes. First, with the development of the regional economic integration, evaluate the necessity of China-Korea FTA. Second, research the development and trade status of iron and steel industry between both countries. Third, analyze the impact of the China-Korea FTA on various iron and steel products division of competition.Free trade agreement as the preliminary stage of regional economic integration process, compared to complete economic integration of Europe, although has lots of economic limitations, but because of the advantages of simpler and easier process, today many countries over the world actively participate in regional economic and trade agreements.Based on Viner static model and dynamic model of the economic effects of FTA, this paper mainly analyzes that the China and South Korea steel intra-industry Trade index and Trade specialization index.In this paper, the254kinds of steel products of iron and steel industry can be divided into to10group, and from2001to2011can be divided into four period, calculate the steel products to China and Korea’s trade specialization index and intra-industry trade index, the results are as follows. Both China and Korea have a comparative advantage in the iron and steel products, this is because the steel industry between the two countries have their own specific advantages, such as China’s relatively low price of steel plate, Korea’s high technology. But now, due to the rapid development of China’s steel industry, China and Korea steel trade has strong intra-industry trade. By2011, most of China’s iron and steel products of TSI values continue to rise. Among them, the medium thickness plate, hot rolled steel plates, steel pipes are increasing to the export sharply while the plate, hot rolled steel plate and other steel products are increasing to the imports in China. However, the cold rolling steel plates, surface treatment of steel plates, steel pipes are increasing to the export while the plate, hot rolled steel plate are increasing to the import in Korea.Tariffs on Chinese steel products now hold for5-7%, while Korea’s most steel products have no tariffs. After establishing China-Korea FTA, therefore, the iron and steel industry trade situation and competitiveness will be affected by some influence. First, with the Chinese comparative advantage and the noncompetitive products, there has been inter-industry trade between China and Korea. In other words, Chinese products have strong comparative advantage. Second, with the Chinese comparative advantage and noncompetitive products, China’s competitiveness has been increased gradually. Third, with the Korean comparative advantage products, Chinese gold-plated and cold-rolled steel plate would be weaken the price competitiveness after signing of China-Korea FTA, while Korea’s these steel products production capacity is strong, can lead to increase exports to China.