IMPLICATIONS OF U.S. FREE TRADE AGREEMENT WITH SOUTH KOREA

This paper examines the effects of a U.S.-Korea free trade agreement (FTA) on various sectors of the economy in the two countries using a general equilibrium model. Our analysis indicates that the increase in U.S.-Korea bilateral trade volume in recent years is through intra-industry trade of high-technology products. Under a U.S.-Korea FTA, the bilateral trade volume would increase for virtually all the sectors and the GDP and social welfare would improve for both countries. However, producers of textile products in the United States and producers of agriculture and food products in South Korea would suffer from the FTA. How to compensate those groups would be instrumental to the smooth implementation of the FTA.