The impact analysis of structural change in Korean agriculture with respect to the Korean-United States free trade agreement: dynamic simultaneous equation model approach

Abstract

[ACCESS RESTRICTED TO THE UNIVERSITY OF MISSOURI AT AUTHOR'S REQUEST.] The main objective of this study is the analysis of the impacts of the Korean-United States Free Trade Agreement. On April 2, 2007, Korea and the United States concluded a historic comprehensive free trade agreement that will eliminate tariffs and other barriers to trade in goods and services and immediately lift 85 percent of each nation's tariffs on industrial goods. To analyze the Korean agricultural impacts of the KORUS FTA under the current circumstances, KASMO (Korea Agricultural Simulation Model) was built by FAPRI-MU and KREI in September 2008. KASMO is a large-scale dynamic simultaneous equation model that contains sixty-seven commodities, macroeconomic indices, input cost price indices, an agricultural total value module, and an agricultural population module. The model includes 2,019 equations and formulas and uses 2,435 variables. It covers 95 percent of the Korean agricultural sector based on 2007 agricultural production value. To analyze separately the trade effects from the KORUS FTA, import demand functions were included for imports from the U.S. and other competitive countries, with separate treatment of food and feed uses. The analysis of the KORUS FTA uses as a point of comparison a 17-year deterministic projection incorporating the various agricultural policies and specific macroeconomic assumptions.