무역자유화는 항상 공정한 교역질서를 보장하는가?: 비시장경제와 시장경제간의 무역을 중심으로 = Does Trade Liberalization always Guarantee Fair Trade Outcome?: Focusing on Trade Liberalization between Market Economy and Non-Market Economy

다국어 초록 (Multilingual Abstract)

After the launch of WTO, many countries that have actively participated in a trade liberalization have obtained the gains from trade and the social welfare improvement. South Korea that is one of the leading economies to seek to liberalize its trade with many countries have enjoyed sustained economic growth. South Korea’s most recent efforts of liberalizing trade were to make a free trade agreement with Vietnam and one with China, respectively. But we may have overlooked the characteristic of those countries; they are categorized into non-market economy, which implies that liberalizing trade with those countries will not result in the outcomes that we expect. For example, US, EU, and WTO have applied a different rule on those economies in anti-dumping process, according to the non-market economy treatment; the non-market economy is a country that does not operate on market principles of cost or pricing structure, so sales of good in such country do not reflect the fair value of the good. Oil industry is a clear example of how a pricing regime of a non-market economy is obviously different to one of a market economy. In South Korea, prices of oil products are determined by the private firms while in China, domestic fuel price is controlled by a governmental committee. As well, according to the annual Fortune 500 list, most of the Chinese 110 firms that operate in the petroleum, finance, automobile, electricity and natural resource sectors are state-owned. Then after a trade liberalization occurs, private firms from the market economy should compete with state-owned firms from the non-market economy. Generally, the private firms produce the profit-maximizing quantity while the state-owned firms produce the welfare-maximizing quantity. The quantity produced by the state-owned firms from the non-market economy must be much greater than the quantity by the private firms from the market economy, lowering the market price and reducing the profit margin of the private firm. In this context, the state-owned firms can take more advantage relative to the private firm in the market. As well, such a competition will obstruct the efficient resource allocation in both countries since it allows inefficient state-owned firms to produce more.
To describe and analyze this situation, we apply two-stage game theoretical model. We assume that a private firm from a market economy and a state-owned firm from a non-market economy compete in the final good market in both countries. Each government in each country sets a specific tariff on the imported good. After a trade liberalization, there are not any tariff on the good. In the first model without a vertically integrated firm, both firms procure the intermediate good from an external region. In the second model, the private firm still purchases the intermediate good from the external region but the state-owned firm produces the intermediate good by itself. The sequence of the game is as follows: in the first stage of the game, each government chooses an optimal tariff, after observing the tariff, in the second stage of the game, an intermediate firm sets an intermediate good price, and then, in the third stage of the game, a private firm chooses a profit-maximizing quantity and a state-owned firm chooses a social-welfare maximizing quantity.
From the analysis of the mixed duopoly model, we obtain the results. The first result shows that the trade liberalization does not lead to an expansion of the trade volume since the state own firm in the non-market economy produces a social-welfare maximizing quantity, which substantially impedes market access by the private firm into the non-market economy. Besides, the trade liberalization does not guarantee the social welfare improvement of both countries.
From the analysis, we obtain three major policy implications. First, we should not participate in the trade liberalization with the non-market economy that may distort international trade rules and decrease the social welfare. Second, we should not overlook the characteristic of the non-market economy when making a trade deal with those countries. Third, in case of negotiating tariff level for the trade liberalization with non-market economy, the solution to the negotiation is to set a tariff concession rate for goods produced by state-owned firms to be ratcheted down as long as the state-owned firms in the non-market economy are privatized.

참고문헌 (Reference)

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