Running head: TRADE AGREEMENT/TREATY AND BAILOUT 1 Unit VI Scholarly Activity xxx Columbia Southern University
TRADE AGREEMENT/TREATY AND BAILOUT 2 INTRODUCTION There are many Free Trade Agreements (FTAs) or Treaties signed in different areas in the world that creates a complex metric of international business where benefits interdepend with each other. FTAs encourage international trade because they are mutual agreement to reduce trade barriers among countries for facilitating import and export activities. Number of alliances such as EU and WTO founded to facilitate the free trade among members. PART 1: TRADE AGREEMENT AND TREATY 1. The China-South Korea Agreement China is the biggest importer of South Korea, which accounts for about 24% exported goods. After a long period of negotiation from 2004, finally Chinese-South Korea free trade agreement signed on December 20, 2015. Under the agreement, China and South Korea will eliminate tariffs of 91 and 92 percent of goods exported from its partner respectively within 20 years from the implementation date of the agreement. In 2018, South Korea exported to China $605 billion and imported from China $553 billion [CITATION Wor \l 1033 ]. The trade flow of the U.S. with China and South Korea deficits, and the values of 2016, 2017 and 2018 are depicted in the Fig. 1 and Fig. 2 [CITATION Off1 \l 1033 ]. According to Daniels, Radebaugh, and Sullivan (2018): trade balance (NX) = Export (EX) – Import (IM). In case NX is positive, the trade surpluses and via versa, the trade deficits. The FTA between China and South Korea might help trade flow between two countries increase significantly and as a result, it influences the export of the U.S.
TRADE AGREEMENT/TREATY AND BAILOUT 3 Exports Imports Balance -600,000 -400,000 -200,000 0 200,000 400,000 600,000 Fig 1. The U.S. - China Trade Flow (million $) 2018 2017 2016 Exports Imports Balance -40,000 -20,000 0 20,000 40,000 60,000 80,000 100,000 Fig 2. The U.S. - South Korea Trade Flow (million $) 2018 2017 2016 Advantages More goods imported from China and South Korea may satisfy U.S. consumers because they have many opportunities to select various sources of goods with low prices from China and South Korea. In addition, unbalance trade may be a reason for U.S government claiming China and Korea, and request two countries open wider door for U.S. companies. The agreement may be a signal of change (from deficits to surplus of goods in the future). Higher trade volume from China and South Korea may help U.S. economic growth and as a result, more jobs created and unemployment rate will decrease. U.S corporations may have more initiatives to reduce costs of production or supply higher quality to get higher completive advantages with competitors from China and Republic of Korea. The higher trade flow with China and South Korea may strengthen relationship among three countries and enhance the role of U.S. with China and South Korea.
- Spring '12
- International Trade, World Trade Organization