Industrial Trade Creation Effect Analysis after Kore-U.S. FTA:i ncluding an Analysis on the Change of the Social Welfare in the Rice Market

This paper shows the economic effects after Korea-U.S. FTA through Panel Model and Simultaneous Equation Model. First of all, the panel analysis results of industrial trade creation effects due to the tariff elimination after Korea-U.S. FTA are as below. It can be expected for Korea to increase the amount of exports 108.1 million dollars in the field of transport industries (automobiles/parts and other transportation instruments) and 1.14 million dollars in the field of telecommunication industries. For the U.S., it can be expected to increase the amount of exports ; 25.16 million dollars in the field of precision industries, 4.42 million dollars in the field of telecommunication industries, and 0.27 million dollars in the field of computer industries. In addition, the social welfare effects in the rice market of Korea are as below, i.e. supposing that the only rice market is opened and the quality of rice harvested in Korea and the U.S. is the same. In case that Calrose rice can be distributed fully in Korea market and the rice price in the U.S. is applied in Korea, total social welfare is estimated to increase about 1,981.6 billion wons. If the social welfare effect is divided into consumer’s surplus and producer’s surplus, it can be expected for consumers in Korea to be benefitted about 8,675.9 billion wons. However, it can be expected welfare loss about 6,694.2 billion wons for workers in the rice industries of Korea.