New Publication by Benjamin Jung [14.11.22]
"The Trade Effects of the EU-South Korea Free Trade Agreement: Heterogeneity Across Time, Country Pairs, and Directions of Trade within Country Pairs", published November 12, 2022 in Open Economies Review.
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In the paper, Benjamin Jung applies the gravity equation of international trade to quantify the impact of the EU-South Korea trade agreement on bilateral trade. The gravity equation of international trade is both intuitive, as it is based on Newton's law of gravity, and grounded in trade theory. It is an important tool in empirical trade research to quantify the effects of trade policy. The EU-South Korea FTA (2015), is an example of so-called "deep" regional trade agreements that include non-tariff measures such as regulatory barriers, services, intellectual property rights, and bilateral investment in addition to tariffs.
Benjamin Jung uses a new dataset (Monteiro, 2020) that contains information on international and intranational trade flows for a large number of countries. He examines the heterogeneity of the impact of this agreement on bilateral trade in manufacturing goods (i) over time (anticipation and gradual/lagged adjustment), (ii) between pairs of countries from EU member countries and South Korea, and (iii) between trade directions within these pairs (EU member exports to South Korea and EU member imports from South Korea). He founds out, that the positive trade effect that occurs immediately after the announcement of trade negotiations disappears one year before the agreement enters into force. Moreover, EU countries' exports to South Korea increase, while EU countries' imports are not significantly affected. The additional imports caused by the agreement are larger for those EU countries where South Korea already accounted for a large share of extra-EU imports before the agreement.
