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Determinants on utilization of the Korea–ASEAN free trade agreement: margin effect, scale effect, and ROO effect

Published online by Cambridge University Press:  12 November 2013

KAZUNOBU HAYAKAWA ,
HANSUNG KIM  and
HYUN-HOON LEE
KAZUNOBU HAYAKAWA
Affiliation:
JETRO Bangkok, Japan External Trade Organization, Thailand
HANSUNG KIM
Affiliation:
Department of Economics, Ajou University, South Korea
HYUN-HOON LEE*
Affiliation:
Department of International Trade and Business, Kangwon National University, South Korea
*
* Corresponding author. Email: [email protected]
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Abstract

In this paper we empirically examine the determinants on utilization of the Korea–ASEAN Free Trade Agreement (KAFTA) by employing a database provided by the Korea Customs and Trade Development Institute. We find that, although three effects, namely preferential margin (margin effect), rules of origin restrictiveness (ROO effect), and average export volume (scale effect), contribute to determining the utilization of the FTA, the scale effect has the greatest impact. Our results suggest that, since firms with relatively small volumes of trade are usually small and medium-size enterprises (SMEs), policy assistance for reducing administrative costs should be geared toward SMEs. Our results further indicate that policymakers should also try to negotiate more extensive tariff reductions on products not only where MFN rates are high but also where shipments are large.

Type
Review Article
Information
World Trade Review , Volume 13 , Issue 3 , July 2014 , pp. 499 - 515
Copyright
Copyright © Cambridge University Press 2013 

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