Article

Examining the Impact of Korea’s Free Trade Agreement (FTA) on Seaborne Trade Cargo Volumes1)

Chan Young Jun*, Soo Young Lee**, Young Gyun Ahn***
Author Information & Copyright
*First author, Senior Research Fellow at Port Research Division, Korea Maritime Institute, Seoul, Korea
**Corresponding author, Researcher at Port Research Division, Korea Maritime Institute, Seoul, Korea, sygen@kmi.re.kr
***Co-author, Researcher at Port Research Division, Korea Maritime Institute, Seoul, Korea

© Copyright 2021 Korea Maritime Institute. This is an Open-Access article distributed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/4.0/) which permits unrestricted non-commercial use, distribution, and reproduction in any medium, provided the original work is properly cited.

Published Online: Jun 30, 2014

ABSTRACT

This paper aims to estimate the net effect on port cargo volume generated by free trade agreement (FTA) through empirical analysis of port cargo, employing various econometric models. To estimate the change in trade volume, we adopted various models such as gravity model, network model, and modified gravity model. Our test results show that the net effects of the FTA on port throughput estimated by the network model account for 2~6% annual increase in terms of performance in 2012. In contrast, the net effects by the modified gravity model are four to six times higher than those by the network model. Therefore, it implies that there is a large gap in the estimated FTA effect among the applied estimation models. However, this gap can be explained so far as the diversion effect caused by the FTA in trade between countries is taken into consideration. We conclude that the modified network model is the most appropriate for estimating the effect of the FTA in terms of how easily the explanatory variables can be estimated, how exactly the diversion effect of trade can be excluded, and how simple the estimation is.

Keywords: gravity model; network model; FTA; port throughput; substitution effect