Some exporters prefer to use the rates of the most favoured nation, even if they export to a member of a free trade agreement. This section analyses the impact of exchange rates on the use of free trade agreements, with an emphasis on the ASEAN-Korea agreement. The depreciation of an ASEAN exporter`s currency against the (Korean) importer`s currency increases the tariff utilization rates of the trade agreement, which has an impact on the development of the rules of origin. Exchange rates affect the use of free trade agreements (FAs). This paper examines the impact of exchange rates on the use of a free trade agreement (FTA) in trade. Changes in exchange rates have a dual impact on the use of free trade agreements. The first is to change the excess profits generated by the use of the free trade agreement and the second is to promote compliance with the rules of origin. Our theoretical models predict that the devaluation of exporters` currency relative to that of importers will increase the likelihood of the use of free trade through these two channels. In addition, our empirical analysis, based on rich customs line data on the use of free trade agreements with Korean imports from ASEAN countries, is based on the theoretical prediction. We also show that the effects are lower for more nuanced products.

Keyword: free trade agreement; Exchange rates Exchange rates Rules of origin JEL Classification: F13; F15; F31; In particular, we assume that the exporter`s currency devalued against the importer`s currency. Given the empirical evidence of market prices for companies for which exporters stabilize prices relative to importers` currency, it is appropriate that at least some of these exchange rate changes translate into export prices denominated in exporters` currencies. The depreciation of the exporter`s currency against the importer`s currency increases export prices per unit of measurement relative to exporters` currencies and improves the value-added ratio. As a result, this depreciation facilitates exporters` compliance with the regional value content rule. A similar mechanism may also work in other types of rules of origin. For example, the classification rule for tariff modification requires that exported products have a different customs classification than their non-native inputs. With regard to the tariff modification rule, the so-called “de minimis” rule is often available as a rescue measure, as it allows non-original joint customs production if these inputs represent only a certain share of the prices of exported products (for example). B 10%) 11.

Therefore, the share of non-native benefits also plays a role in accordance with the rate change rule. Bureau, J C, R Chakir and J Gallezot (2007), “The use of trade preferences for developing countries in the agri-food sector,” Journal of Agricultural Economics 58, 175-198. We are developing a theoretical model that involves taking into account the rules of origin. This evidence deepens our understanding of the impact of exchange rates on trade. In general, it is thought that a devaluation of the national currency leads to an increase in exports under the Marshall-Lerner condition by lowering the prices of the importers` currency relative to the prices of products from other countries. The above effect on the use of the free trade agreement implies that the effect of currency devaluation is not limited to such a direct channel between the ESTV Member States. Since trade values generally increase when MFN systems are converted to free trade systems due to lower trade tariffs, the depreciation of the national currency may increase more sharply than if only the model effect mentioned above by relative price changes are taken into account. We see this effect of exchange rates on the utilization rate of the AKFTA Free Trade Agreement. In particular, by examining the use of AKFTA at the product level for exports from ten ASEAN countries v