Relationship between Free Trade Agreement and Foreign Direct Investment

Kim, Hyunjin

This paper analyzed the FDI trends between Korea and its FTA partners which were Chile, Singapore and EFTA. The other group was central European countries and their FTA partner countries that are Chile, Mexico and South Africa. The empirical studies of FDI developments after FTA have found that the results were different from country to country even though they have the FTA status with the same countries. Korea has been increased FDI investment in its FTA partner countries but not with Chile and EFTA. Similarly, Germany has increased its FDI in their FTA partner countries after FTA. But most central European countries which are Czech Republic, Slovakia, Poland and Hungary were not much changed their FDI investment after FTA. But their investment also increased when we measure FDI in the absolute numbers between before and after FTA. Regarding the prospects of FDI flows between Korea and central European countries after ROKEU FTA, We took into accounts such as FDI trends with its FTA partners, FDI regime and current FDI position etc including ROKEU FTA itself. Basically, we could predict that FDI would increase in central European countries from Korea when we consider the previous trends between them and the results of empirical analyses of the FTA partner countries. So it is hard to say that FDI will be increased in Korea from these countries after FTA. But Germany would be very active outward economy and it would invest more in South Korea than before FTA.

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