Simulation for Japan-Korea FTA and its economic impacts on agriculture: A CGE approach
2017
Ko, J.H. (Pukyong National University, Busan (Korea). Division of International and Area Studies) | Ito, S.
This study aims at conducting a quantitative assessment of the potential economic effects of a Japan-Korea free trade agreement (FTA) on agriculture in both countries at the macroeconomic and microeconomic levels using a multi-region and multi-sector computable general equilibrium model. The GTAP model and GTAP database version 9 released in May 2015 are used for this study. There are three scenarios assumed for the Japan-Korea FTA: a 50% cut of tariffs on all imports between Japan and Korea, a 75% cut of tariffs and a 100% cut of tariffs. In addition, it is assumed that for each of the three scenarios total factor productivity (TFP) of Japan and Korea increases by 0.15%, as trade openness defined as a ratio of a sum of exports and imports to GDP rises by 1% as a result of the FTA and that labor supply increases by 0.8%, as real wage rises by 1%. Japan and Korea are predicted to get additional gains in terms of real GDP, welfare, exports and imports from the FTA. A higher degree of trade liberalization between Japan and Korea leads to bigger macroeconomic effects for both of them. However, its impact on their production and value-added by sector varies.
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