Free Trade Agreements and Import-import Substitution Effect Evidence from a CGE Analysis: The Case of EU-Korea and EU-Japan FTAs

Abstract

Taking account of both the impact of different Armington elasticities and different actionability of nontariff measures (NTMs), I use a computable general equilibrium model to simulate different scenarios for the implementation of the European Union-Korea FTA and European Union-Japan FTA. The results show that Korea’s decision to sign an FTA with the EU before Japan could support Korea’s exports to the EU in the first scenario (I), where only the EU-Korea FTA is in force, and safeguard its exports from the effects of enforcing the EU-Japan FTA in the second scenario (II).