The Determinants Of Trade Agreements In Services Vs. Goods

Based on the results of the gravitational model, it is accepted that economic variables such as GDP and geographical variables such as distance determine trade flows between South Korea and its partners. On the one hand, it was found that overall and sectoral trade flows are positively determined by the income of the exporting and importing country, indicating that the GDP of the buying country has a greater influence on trade than the GDP of the selling country. The Colombian government has a growing interest in strengthening trade relations with Asian countries in order to attract productive foreign investment and gain preferential access to distributors of goods and services in different markets. As a result, Colombia has been part of the Pacific Alliance1 since 2012 and in 2013 signed the Free Trade Agreement (FTA) with the Republic of Korea2. The survey of products traded under the chapters of the Harmonized System (double-digit) revealed that 78.3% of Colombian exports to South Korea in 1993 were coffee, tea, mate and spices. Coffee remained the most exported agricultural product (13.5%), but iron and steel accounted for 79.7% of turnover in 2003. In 2013, exports of coffee and related products increased (20.7%), exports of iron and steel decreased (25.8%), but mineral fuels and mineral oils (31.4%) began to play an important role in the Colombian export basket to the Asian country (see Annex 4). In terms of Colombian imports from South Korea, machinery and electricity (20.9%) and transport (41.5%) products dominated in 2013 (see Annex 5). Deardorff (1998) constructed an equation that theoretically corresponds to the Hecksher Ohlin model of inter-industry trade. Similarly, Bergstrand (1985), Helpman & Krugman (1985) have found a version of the equation that starts from assumptions of product differentiation and economies of scale. While Bergstrand (1989), Evenett and Keller (2002) draw the equation from the Hecksher-Ohlin theory and the theory of rising yields, they conclude that factor endowments and economies of scale explain different components of production models and trade volumes. The debate on the causes of international trade gives rise to different theories and techniques of empirical approximation for its study.

Three theoretical reasons are generally accepted. First, countries act because they are different and can benefit from a relationship in which everyone does what they do relatively well. .