Study On The Deficit In Trade Goods Of Sino-Korea Under FTA

China and Korea enjoy close economic and trade exchanges since they formally established diplomatic relations from August 1992. The total volume of trade in goods rising from 5 billion to 200 billion dollars. Now, China is the largest importer for Korea, at the same time, Korea’s position for China is also becoming very important. Although the bilateral trade dependence continues to increase, China always in the position of deficit and the amount is very huge. Now, Korean has become the biggest surplus economy for China. Although moderate trade deficit will help to ease trade friction, maintain the stability of trade, deficit excess will seriously influence the development of Chinese economy and the trade relationship between China and Korea.FTA is an important measure to alleviate the trade deficit. Building an FTA that contain China, Japan and Korea is the internal demand for Asian economic development. However, as the economic interests and political policy is very hard to reunification, the FTA which contain all these three countries is difficult to achieve in short time. The establishment of FTA between China and Korea at first and then promote to three countries is the most feasible method. The FTA negotiation of Sino-Korea was launched in 2012, the two parties signed the Free Trade Agreements in June 2015 after a dozen round of discussion and consultation. Then, FTA between the two parties established. The foundation of FTA could not only further consolidate economic cooperation for China and Korea, but also play a significant role in relieve the trade deficit of China.Trade deficit in goods of Sino-Korea is the core of this paper. First we analysis the status of trade in goods and it’s deficit between the two countries, the result shows that the amount of deficit keep rising accordingly with the rush of the volume in goods trade. Next, the reasons for huge trade deficit. Vertical intra-industry trade and the gap of market capacity is the root cause; The great gap on the average import tariffs and rigid Technical Barriers to Trade (TBT) of Korea is the key cause, especially on trade of agricultural products; The gap on mutual FDI is an important cause. Last, how FTA to alleviate Chinese large deficit to Korea. This paper quote the Gravity Model and Trade Potential Model to demonstrate that the establishment of Sino-Korea FTA could largely increase mutual trade amount, push the industrial upgrading, promote the cooperation deepening; Refer to the tariffs reduction sheets and the new regulations in Free Trade Agreements of Sino-Korea, we can draw conclusion that the FTA can cut the import tariff for Chinese products and optimize the export environment; At the same time, FTA could improve the Investment environment in Korea and increase Chinese investment volume.The study objective is to find out the specific aspects that FTA can relieve the deficit, like speeding up the innovation of enterprises and increasing the added value of the products, focusing on the advantage goods of China during the trades of Sino-Korea, government strongly supporting China’s investment in Korea, and then make proposals accordingly so as to make the FTA play a bigger role on relieving the deficit and promoting the development of economy and trade, finally achieve a win-win cooperation.