Comparative Intra-industry Trade Analysis on the Asymmetric Effects of the FTA: Korea and MENA Countries

Intra-industry-trade (IIT) demonstrates the degrees of integration of an economy with the world and the status of that economy within the global value chain. This paper compared the IIT data of Korea and selected MENA countries. The Grubel and Lloyd index was calculated using the COMTRADE data during the period of 1995-2015 to compare the dynamics of IIT flows under each free trade agreement (FTA) regime. IIT flows did not show much change in patterns in the case of Algeria and Saudi- Arabia. In particular, it was found that the FTA of Algeria with the EU did not affect the trade structure. The comparative advantage of Algeria and Saudi-Arabia remains in their primary commodities reflecting a narrow industrial base. But the IIT flows of Turkey exhibited that Turkey had been integrating into the global value chain system after its FTA with the EU. These results are in accordance with the findings of Bülhart(2008) indicating that the positive association between IIT and income is not universal. As for Korea, its IIT flows shows that the Korea economy has become deeply integrated with the EU and the USA following its FTA. Overall, the IIT flows have been advancing to a high level of trade structure.