Korea-ChinaFTAasaCatalystforFosteringtheIntra-industry.doc

Korea-China FTA as a Catalyst for Fostering the Intra-industry Specialization with Agglomeration Effect Hae-du Hwang, Yonghee Lee and Sungchul Bang* Abstract Previous studies on the FTA between Korea and China argue that technology-intensive manufacturing sectors procure some benefits from the trade creation effect and dynamic one whereas small-and-medium enterprises and agricultural sectors incur some costs of industrial adjustment. This research recapitulates the industrial adjustment policy of Korea by supplementing the agglomeration effect of new economic geography and the new attributes of FTA. The analysis on the trade and investment of manufacturing demonstrates that it may be imperative for Korea to pursue the intra-industry specialization with China by fully taking into account the reduced technology gap. Its policy implications based on the SWOT analysis on automobile and the trade specialization index analysis on ancillary industry comprise the joint operation of human resource development and RD activities as a means of accruing the cumulative causation effect between market expansion and technology innovation. Keywords: FTA, intra-industry specialization, industrial adjustment policy agglomeration effect, new economic geography JEL codes: F15, L62, O14 ------------------------ * Hae-du Hwang, Professor of Department of International Trade, College of Commerce and Economics and Director of Seoul European Institute, Konkuk University, Phone: 82-2-450-3653, Fax: 82-2-3437-6610, First author, E-mail?: Haedu.Hwang@konkuk.ac.kr; Yong-hi Lee, Visiting Researcher, Seoul European Institute, Second author; Sung-chul Bang, Doctoral Candidate, Department of International Trade, Konkuk University We are grateful for the helpful comments of Dr. Chul Cho of the Korea Institute for Industrial Economics Trade on automobile industry. This research is partially funded by the research grant fr