A Study of Impact of Cumulative Rules of Origin on Korea Trade Flows

Research on the cumulative rules of origin(ROO) and trade flows has been conducted to explain impact of ROO on trade in the whole FTA context. This study examines the cumulative ROO and effects on trade in Korea, which has concluded FTAs with various countries 20 years after concluding its first FTA. However, empirical analysis of the relationship between FTAs and trade has been limited due to difficulties in measurement. Most studies use the Gravity Model to explain the relationship between the bilateral trade flows and ROO. In this study, we also used the Gravity Model to conduct fixed effects analysis using PPML, which is known to be more appropriate than random effects analysis in panel data models. As a result of the analysis, unlike the results of anlaysis of FTAs around the world, Korea was found to be unable to explain the direct relationship between cumulative ROO and trade flows. These results could be interpreted as Korea’s unique content in FTA conclusion, and this could provide many implications in the ongoing FTA negotiation process and future FTA negotiations.