An Analysis of Korea-ASEAN Trade and its Implications for the Shipping Industry in Korea

ABSTRACTThe shipping industry is an import economic player in Korea, and demand for shipping closely intertwines with the global trade climate. Understanding how movements of income and price influence freight volume measured in TEU is critical for improving shipping companies’ fleet deployment and scheduling. This paper estimated within the framework of a vector error correction model in a time series analysis for the period of 2000Q1 to 2015Q2 trade elasticities of income and real exchange rate of Korea's exports to and imports from ASEAN-5 (Indonesia, Malaysia, the Philippines, Singapore and Thailand). We found that trade elasticity of income exerts a significant, positive influence on the volume of Korea's exports to and imports from ASEAN-5 and that during the same period the real exchange rate exerts asymmetric influence over Korea's trade with them. Surprisingly, we failed to find the Korea-ASEAN FTA to further facilitate trade volume between Korea and ASEAN-5, when measured in TEU.