Promotion Strategy and Economic Effect of an Inter-Korean CEPA

Abstract

This study examines the necessity and possi-bility of an inter-Korean FTA in order to ex-pand inter-Korean economic cooperation and economic integration between the two Koreas. In the meantime, inter-Korean economic co-operation has been free of tariffs (zero tariffs) since 1992 in accordance with the principle of “domestic transaction,” and has been tolerated by the international community. However, as the scale of inter-Korean economic coopera-tion increases and economic integration is dis-cussed in a fuller context, it is expected to be-come inevitable for the international commu-nity to raise the issue of trade practices. Also in the long run, if North Korea joins the WTO, there is the possibility of a complaint being lodged against South Korea, a member of the WTO, by WTO member countries. In this pa-per, we propose a Closer Economic Partner-ship Arrangement (CEPA) as a new develop-ment model of inter-Korean economic cooper-ation that will secure international legal legit-imacy and contribute to economic change in North Korea. First, it reviews the necessity and possibility of conclusion of a CEPA for the two Koreas. Then it provides the key contents that should be included in the CEPA and seeks a conclusion strategy. Finally, the eco-nomic effect of the inter-Korean CEPA will be analyzed.