Effects of Korea-Japan FTA on the Korean Agricultural Sector :Evaluation and Strategy

Japan is the largest export market for Korean agricultural products. If Korea and Japan agree to make an FTA between two countries, Korea could increase agricultural exports. In order to test the effect of FTA on agricultural exports, an econometric model and a Computable General Equilibrium(CGE) model were applied in this paper. A CGA model shows positive effects of FTA on the Korean agricultural sector. Korea’s agricultural exports to Japan increase in fruits, vegetables, floriculture, and pork from the abolition of tariffs. Agricultural GDP increases by 14percent. Exports of Korea’s top ten fresh agricultural products increase by $57 million from the FTA. However, agricultural imports from Japan also increase in some sectors like cigarettes. Japanese market is hard to penetrate in many cases because of non-tariff barriers rather than high tariffs. A study(Choi et al. 2001) on non-tariff barriers in Japan concluded that many exporters have difficulties in sanitary and phyto-sanitary regulations in Japan. The other non-tariff barriers which exporters encounter are technical barriers, standards, different customs and rules of origin. FTA effects will increase when non-tariff barriers are abolished.