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Running head: COUNTRY TRADE PROPOSAL 1 Country Trade Proposal: South Korea Trade with US and China Student’s Name Institutional Affiliation

COUNTRY TRADE PROPOSAL 2 Country Trade Proposal: South Korea Trade with US and China Overview of South Koreas International Trade with the US and China South Korea is a small but highly industrialized and export-driven nation in East Asia. Numerous industries, including electronics, machinery, chemicals, automobiles, and shipbuilding, support the country’s economy. South Korea’s international trade has played a significant role in its economic development, as it has depended on exports as a major source of growth and income. According to the OEC (2022) report, South Korea has been a key player in the global economy, with its total exports amounting to more than $531 billion annually. The nation has a network of free trade agreements with several countries, including the United States, China, Japan, and the European Union, which have helped to enhance its trade openness and competitiveness. The recent international trade patterns between South Korea, the United States, and China can be explained using the Gravity model and the Standard Trade model, which describe the positive relationship between the size of the economies and the growth of bilateral trade between them. South Korea’s two main trade partners are the US and China. According to data from the World Trade Organization, South Korea’s total exports in 2020 amounted to $512.49 billion, while its total imports were $467.63 billion, resulting in a trade surplus of $29.42 billion (Santander, 2022). In the same year, China and the United States were the largest export destination for South Korea, accounting for 25.9 % and 14.5% of its total exports, respectively (Santander, 2022). The two nations, China and the US, were also the largest source of South Korea’s imports, accounting for 23.3% and 12.4% of total imports, respectively (Santander, 2022). South Korea exports a wide range of products to China and the US, including electronics, machinery, automobiles, chemicals, and shipbuilding. In terms of imports, South Korea relies

COUNTRY TRADE PROPOSAL 3 heavily on China for numerous products, including machinery, electronics, clothing, and textiles. The US is also a key source of imports for South Korea, particularly in machinery, chemicals, and agricultural products. I will use the Gravity model as my theoretical grounding to evaluate the trade patterns between South Korea and the United States. The Gravity model envisages that the bilateral trade between two nations is positively related to the size of their economies and inversely related to the distance between them. According to Pal and Kar (2021), the gravity models in trade expect trade volume to be positively affected by GDP (the economic mass) and negatively related to distance. The model is grounded on the supposition that the trade costs between nations are a function of the distance between them and that larger and more developed countries have a greater capacity to trade. Figure 1. South Korea Exports to United States (Source: Trading Economics, https://tradingeconomics.com/south-korea/exports/united-states) The import and export data between South Korea and China supports the forecasts of the Gravity model between the two nations. As shown in graph 1 above, South Korea's exports to the

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COUNTRY TRADE PROPOSAL 4 US have risen over the past decade, while the distance between the two countries has remained relatively constant. This information implies that the size of the economies and the level of development in the two nations have played a key role in the growth of bilateral trade between them. I will use the Standard Trade Model as my theoretical grounding to examine the trade patterns between South Korea and China. The Standard Trade Model, also referred to as the Heckscher-Ohlin model, forecasts that nations will export those goods with a comparative advantage in producing and importing those goods for which they have a comparative disadvantage. A nation has a comparative advantage in producing a good if it can produce it at a lower opportunity cost than other nations. Therefore, a nation can produce a product using fewer resources or at a lower cost than other countries. The model is based on the hypothesis that nations have different endowments of factors of production and that the costs of production determine the rates of goods. According to Ren and Ma (2018), China's foreign trade has been dominated by labor-intensive products. On the other hand, South Korea has a comparative advantage in producing high-tech and capital-intensive goods (Mavlianov, 2012). The data supports the Standard Trade Model's predictions regarding South Korea's trade with China. South Korea has a comparative advantage in producing high-tech and capital-intensive goods, such as electronics and machinery, which it exports to China. On the other hand, China has a comparative advantage in producing labor-intensive goods, such as clothing and textiles, which it exports to South Korea. The recent international trade trends between South Korea, the United States, and China can be explained using the Gravity and the Standard Trade models. The Gravity model explains the positive relationship between the size of the economies and the growth of bilateral trade

COUNTRY TRADE PROPOSAL 5 between South Korea and the United States. At the same time, the Standard Trade Model describes the specialization of South Korea and China in the production of different types of goods based on their comparative advantage. Overall, these trade patterns establish the significance of international trade in driving economic growth and development and underscore the role of several factors, including economic size, distance, and comparative advantage, in shaping trade patterns and relationships between nations.

COUNTRY TRADE PROPOSAL 6 References Mavlianov, S. (2012). Export-led growth and economic development of South Korea: lessons for Kyrgyzstan. In International Conference on Eurasian Economies (pp. 13-17). OEC (2022, November). South Korea 2020 Product Exports. https://oec.world/en/profile/country/kor Pal, I., & Kar, S. (2021). Gravity Models in international trade: An exploration in econo- physics. South Asian Journal of Macroeconomics and Public Finance , 10 (1), 72-104. https://doi.org/10.1177/2277978721989922 Ren, Z., & Ma, Y. (2018, October). The significance of comparative advantage theory and competitive advantage theory to the development of China's foreign trade. In 2018 International Conference on Social Science and Education Reform (ICSSER 2018) (pp. 10-13). Atlantis Press. Santander (2022). South Korean foreign trade in figures. https://santandertrade.com/en/portal/analyse-markets/south-korea/foreign-trade-in-figures

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