This study aims to conduct a quantitative assessment of the potential economic effects of the Korea-EU FTA, which took effect on 1 July 2011. The study uses a recursively dynamic CGE model that makes it possible to explicitly take into account capital accumulation over time and different timing of policy implementations related to the FTA. Tariff reductions for primary sectors and manufacturing sectors, as well as tariff equivalents of services are considered for trade liberalization between Korea and the EU. Tariff reductions are assumed to be implemented based on the concessions agreed upon in the Korea-EU FTA over the period 2011 to 2020. Major findings of the study are that Korea will gain an additional increase in real GDP of 1.22% to 1.44% by 2025 and the country s welfare will rise by $8.2 billion to $9.3 billion by 2025. Except for livestock, dairy products, and processed food, Korea s domestic production in all other industries will increase. The increase in output will be made possible, in part, by increased capital stock, which is funded by foreign investors. The Korea-EU FTA will result in an increase in foreign investment and capital stocks in Korea. The opening up of domestic markets to foreign investment as a result of the Korea-EU FTA will lead to the rise in foreign ownership of domestic assets.
Abstract
Ⅰ. Introduction
Ⅱ. The CGE Model and Data
Ⅲ. Scenarios of the Korea-EU FTA
Ⅳ. Simulation Results
Ⅴ. Conclusion
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