THE TRADE EFFECTS OF THE EU-SOUTH KOREA FREE TRADE AGREEMENT IN THE AUTOMOTIVE INDUSTRY

Mathias Juust, Priit Vahter and Urmas Varblane

No 105, University of Tartu - Faculty of Economics and Business Administration Working Paper Series from Faculty of Economics and Business Administration, University of Tartu (Estonia)

Abstract: The EU-South Korea FTA, enforced in 2011, represents a significant case of a trade deal signed between two major developed economies that also belong among the largest car exporters in the world. This paper examines the effects of the EU-South Korea FTA on bilateral automotive industry trade, comparing them to the changes in total bilateral trade. The empirical analysis applies the gravity model framework with its contemporary methodological advancements and estimation techniques. The empirical results show that the trade-enhancing effects of the FTA in the auto trade are substantially higher than in total trade. Additionally, EU bilateral auto exports have increased more than South Korea’s exports. The dynamics of the post-FTA trade flows suggest that the removal of the automotive industry’s non-tariff barriers have played an important role in trade facilitation, especially for EU exports. The enforcement of the FTA has also been followed by notable changes in the structure of EU auto exports with the share of higher value final goods increasing and input goods decreasing.

Keywords: trade agreements; gravity equation; auto industry trade; EU; South Korea (search for similar items in EconPapers)
JEL-codes: F13 F14 F15 O52 O53 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2017
New Economics Papers: this item is included in nep-int
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