Korea has been actively pursuing FTAs since 2003. The huge significance as a signal that the Korean FTA policies have advanced to a new level.
When an FTA comes into effect, the most direct changes are found in tariff reduction or elimination. The Rules of Origin (ROOs) should be met, however, to enjoy those benefits. It is difficult to meet the ROOs that are complex, diverse, and restrictive in most cases. The restrictiveness of ROOs has been a trade barrier in FTAs and can offset the essential goals of FTAs.
There has been active research on the restrictiveness of ROOs, but there is a shortage of research on the effects of ROOs in concluded FTAs pertaining to the actual trade volumes after they come into effect. This study thus set out to analyze the effects of the Restrictiveness Index (RI) on the import size in the Korea-ASEAN FTA.
The empirical analysis results, using the Gravity Model, show that the RI had significant negative (-) effects on the prices of imported goods, which indicates that the restrictiveness of strict and complex ROOs negatively impacts the prices of imported goods. The RI, however, had significant positive (+) effects on the volumes of imported goods, contrary to expectations. This disparity is due to the fact that the items in the top ranks had been consistently imported even before the Korea-ASEAN FTA and were anticipated to be imported for many years to come, thus not being influenced by the RI.
The study also analyzed the types of restrictiveness in the Korea-ASEAN FTA and found that the types were very simple and that the RI concentrated on 4, which raises a need to diversify the types and lower the restrictiveness criteria, in order to have positive impacts on trade volumes between Korea and ASEAN member states.
The present study employed the restrictiveness measurement approach by Estevadeordal (2000) to measure the RI. If future studies search for a more advanced method to measure the RI, with applications for contemporary situations, it will produce more advanced results.