The Effect of the Korea-Australia Free Trade Agreement (KAFTA) on the Korea-Australia Trade Structure

Abstract

This study analyses the effect of the Korea-Australia Free Trade Agreement (KAFTA) on the trade structure between Korea and Australia (2012-2015). The TSI, GL/IIT and CTB indexes were employed to analyse the items traded between Korea and Australia during the period. The results showed a positive effect of the KAFTA, taking into consideration increasing trade between the two countries and Australia securing a competitive position in Korea. An existence of trade interdependence between the two countries is ascertained, looking at the changing trade structure of both countries before and after the agreement. The implementation of the KAFTA is aiding industries and traded items to contribute positively to the trade balance of Korea and Australia, thereby boosting trade between the two countries and with the rest of the world.

Keywords

• Korea-Australia Free Trade Agreement (KAFTA)
• Trade Specialization Index (TSI)
• Grubel-Lloyd (GL)/ Inter-Industry Trade Index (IIT)
• Contribution to Trade Balance Index (CTB)