Technical Barriers to Trade and Korean Exports: The Role of Export Margins and Industry-Specific Characteristics

Purpose - This paper investigates how the intensive and extensive margins of exports, alongside industry-specific characteristics, shape the impact of foreign Technical Barriers to Trade (TBTs) on export performance. By examining variations in capital accumulation, value-added in production, and labor productivity, it provides refined insights into how TBTs affect different industries. Design/Methodology - In order to rigorously examine these relationships, the study employs a two-way fixed-effects model within a gravity equation framework, using industry-level export data spanning 26 countries between 2014 and 2019. The model accounts for both time-invariant heterogeneity and year-specific shocks, ensuring that the estimated effects of TBTs on the intensive and extensive margins of exports are reliably identified. Findings - The results indicate that the presence of foreign TBTs generally has a detrimental impact on Korean export performance. Notably, the extensive margin is more vulnerable, as it reflects a reduction in the number of firms that can successfully engage in export activities. Nevertheless, industries characterized by higher capital accumulation, greater value-added in production, and enhanced labor productivity demonstrate a comparatively lower degree of sensitivity to these trade barriers at the extensive margin. Originality/value - These outcomes underscore the importance of a dual-focused strategy, combining diplomatic channels (such as trade negotiations and policy dialogues) with governmental interventions designed to boost the competitiveness of domestic industries. In particular, supporting small and medium-sized enterprises (SMEs) through capacity-building and productivity-enhancing initiatives emerges as a crucial step in mitigating the constraints posed by foreign TBTs.