Analysis of Korea’s trade diversion effect due to the CPTPP

Abstract

Korea’s accession to the CPTPP has been delayed due to recent trade issues such as the IPEF and Chip 4, but it can be promoted at any time depending on future external conditions. Therefore, this study attempted to confirm whether trade creation and diversion effect occurred due to the CPTPP, which took effect at the end of 2018, and to examine the necessity for Korea to join the CPTPP. In particular, whether there was a diversion effect on Korean trade was empirically analyzed by applying PPML to the gravity model. Until 2020, the third year of entry into force, the trade creation and diversion effect of the CPTPP was not confirmed, considering the impact of all existing FTAs, but the trade diversion effect for Korea was confirmed in the organic compounds (HS29). This study is meaningful in that it empirically analyzed the ex-post trade effect of CPTPP on the items that are most likely to cause trade diversion after the CPTPP entry into force, considering the effects of all existing FTAs,