외국인직접투자와 자유무역협정에 관한 연구

Abstract

The paper examines the impacts of the Northeast Asian Regional Trading Arrangements (RTAs) on inward FDI to Korea. We first study the theoretical background of the relations between RTAs and FDI. Secondly, we analyze the major determinants of the inward FDI to Korea. Finally, a prediction about how the China-Japan-Korea FTA (hereinafter CJK FTA) will affect the inward FDI to Korea is provided. To characterize the inward FDI to Korea, we constructed a fixed effect regression model where inward FDI was regressed on wage and interest differentials between home and source countries, exchange rates, GDP, trade volume, and the number of labor dispute. Our empirical results show that the inward FDI to Korea is of both horizontal and vertical character. We argue that the China-Japan-Korea FTA is very likely to encourage FDI inflows to Korea. It is empirically found that the trade volume variable has a positive impact on the inward FDI in all industries, implying that trade and FDI are complements in the Korean industries. A channel through which FTA may promote the FDI to Korea is growing domestic market size. FTA in general prompts economic growth through enlarged international trade. Therefore, growing consumers' purchasing power under the FTA could attract more FDI into Korea. Whether FTA will discourage or encourage the inward FDI depends on the relative magnitude of positive and negative impacts the FTA will bring. But our temporary verdict is that the CJK FTA is more likely to encourage the inward FDI in general as the Korean labor market is becoming more flexible.