The Economic Effects And Structural Impact Of China-Korea FTA

November 10,2014, China and South Korea FTA ended the substantive negotiations, June 1,2015, China and South Korea officially signed the FTA which means that China reached the largest trade volume, the highest level of comprehensive trade zone. In view of China and South Korea’s trade status in the world, the implementation of free trade agreements between the two countries will have a major impact on the world economic and trade and trade structure and production structure of China and South Korea. Therefore, before the entry into force of the agreement, study on the economic impact and trade effects and structural effects of trade and different industrial sectors of the establishment of FTA between China and South Korea will contribute to the Chinese government and enterprises early to develop coping strategies and maximize the use of the FTA preferential and enhance China’s international influence and competitiveness of the industry.This paper analyzes the current situation of the trade between China and South Korea, then integrate the 129 countries and regions and 57 industries in the eighth edition of the GTAP database into the 12 countries and regions and 15 industrial sectors, and upgrade the GTAP database to form the baseline scenario, simulate the establishment of China South Korea free trade area, finally the simulation results are compared and analyzed. The results show that:First, China and South Korea FTA will have a different impact on the economic benefits and trade of the countries of the world. The establishment of China South Korea Free Trade Zone will have a positive impact on China and South Korea, China and South Korea’s import and export value will increase, the trade conditions are also improve in different degrees, the welfare level of the two countries will also be improved, but the impact of South Korea is more.Second, China and South Korea FTA will have an impact on the volume of bilateral trade between China and South Korea and its major trading partners. As a result of the free trade zone, the establishment of China South Korea FTA will cause a substantial increase in China and South Korea bilateral trade, especially for South Korea’s exports to China. But to a certain extent, the export from other countries and regions to China and South Korea will been suppressed, so as to improve the level of trade with other regions, and to change the structure of regional trade.Third, China and South Korea FTA will affect bilateral trade commodity structure of China and South Korea. China and South Korea FTA’s establishment will have an impact on the bilateral trade structure, resulting in the reallocation of production resources. China and South Korea’s comparative advantage in tariff will be more fully reflected, China has comparative advantage in agricultural products, animal products, processed food industry, South Korea are more developed in mineral products and mineral products, chemical rubber products, metal and metal products, automotive and transportation equipment, mechanical and electrical products.Fourth, China and South Korea FTA will have an impact on China’s trade structure and production structure. From China’s export commodity structure, relative to the benchmark program, after the abolition of tariffs, China’s crops, animals and animal products, minerals and mineral products, processed food, fiber and wood products, chemical rubber products, metal and metal products, automotive and transportation equipment, mechanical and electrical products will increase, but by a certain service industry exports will reduce. From the output of China’s various industries, due to the establishment of China and South Korea FTA, China’s comparative advantage in resource endowments will lead to changes in the distribution pattern of domestic resources, crops, minerals and mineral products, metal and metal products, automotive and transportation equipment, electrical products will have a certain increase, but the production of textiles, chemical rubber and leather products will reduce.Finally, China and South Korea FTA will have an impact on South Korea’s trade structure and production structure. From South Korea’s export commodity structure, relative to the benchmark program, after the abolition of tariffs, South Korea’s export value will increase the industry. From South Korea’s output changes in the industry, the establishment of China South Korea FTA will bring a greater impact for South Korea’s crops, animal products and animal products and processed food industry.In order to further consolidate and develop China’s FTA strategy, to avoid the loss of trade in certain domestic industry, from the view of the FTA strategy, this paper argues that the government should further promote the development of China FTA strategy, especially to promote the agreement negotiations in East Asia which has a great significance to strengthen regional economic and trade cooperation.From the perspective of industrial sector development, The government should take the corresponding measures to trade remedy for the enterprises that take the impact of free trade. From the perspective of China-South Korea trade development, China should take measures to promote the development of intra-industry trade. The superior enterprises and inferior enterprises themselves also should take measures to deal with the impact that China- South Korea FTA may bring.