A Decade of Transformation: Changes in Bilateral Trade Structure and Evaluation of the Korea-China FTA

Amidst the pervasive expansion of global uncertainty, trade and the associated division of labor between Korea and China are undergoing significant structural transformations. To accurately estimate the Korea-China Free Trade Agreement's effect, this study controlled for these various confounding factors to isolate the specific impact of the agreement on bilateral trade. We employed a multifaceted methodological approach, incorporating techniques such as Two-Way Fixed Effects (TWFE), the Staggered Difference-in-Differences (Staggered DiD) framework, and event study analysis. Furthermore, the scope of the investigation was delineated by analyzing both aggregate trade flows and trade disaggregated by end-use. The findings confirm that even when juxtaposed against underlying structural changes in both economies and the prevailing uncertainty in the global trade landscape, the Korea-China Free Trade Agreement successfully acted as a stimulant for bilateral trade.