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Was the KORUS FTA a Horrible Deal?

Author

Listed:
  • Hyeongwoo Kim
  • Madeline H. Kim
  • Divya Sadana
  • Jie Zhang
Abstract
Donald Trump claimed that the free trade agreement with Korea (KORUS FTA) was a horrible deal because the U.S. trade deficit increased substantially after the agreement went into effect in March 2012. However, similar deteriorations occurred during the same period in the U.S. trade balances with most other major trading partners, even though none of them had an FTA with the U.S. We investigate the causal effects of the KORUS FTA on the trade account balance between the U.S. and Korea via the difference-in-differences approach. Our empirical analysis provides strong evidence in favor of Trump's claim, controlling for potential impacts of economic fluctuations over time.

Suggested Citation

  • Hyeongwoo Kim & Madeline H. Kim & Divya Sadana & Jie Zhang, 2022. "Was the KORUS FTA a Horrible Deal?," Auburn Economics Working Paper Series auwp2022-02, Department of Economics, Auburn University.
    • Handle: RePEc:abn:wpaper:auwp2022-02
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    File URL: https://cla.auburn.edu/econwp/Archives/2022/2022-02.pdf
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    References listed on IDEAS

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    1. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-793, September.
    2. Baier, Scott L. & Yotov, Yoto V. & Zylkin, Thomas, 2019. "On the widely differing effects of free trade agreements: Lessons from twenty years of trade integration," Journal of International Economics, Elsevier, vol. 116(C), pages 206-226.
    3. Baier, Scott L. & Bergstrand, Jeffrey H., 2007. "Do free trade agreements actually increase members' international trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 72-95, March.
    4. Baier, Scott L. & Bergstrand, Jeffrey H., 2009. "Estimating the effects of free trade agreements on international trade flows using matching econometrics," Journal of International Economics, Elsevier, vol. 77(1), pages 63-76, February.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    KORUS FTA; Trade Deficit; Difference-in-Differences; Causal Effect;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

    NEP fields

    This paper has been announced in the following NEP Reports:

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