7 annual Conference on Global Economic Analysis th

This study analyzed the air pollution impact in Korea induced by trade liberalization between Korea and Japan. A standard multi-region CGE model based on GTAP database Ver. 5.0 and Korean air pollution inventories in 1998 were used to give a quantitative feature of trade and environment linkage in Korea. The simulation result shows that the aggregated environmental effect depends on the change of specialization structure between pre and post trade liberalization. The inter-industrial difference of emission coefficients and of disposal cost by air pollutants plays a major role in determining the scale of the aggregated environmental effect. The free trade agreement between Korea and Japan reduces the overall air pollution emission by 0.36 % but increases the pollution disposal cost slightly by 0.06%. The rate of disposal cost increase is much smaller than that of the real GDP(0.28%). This type of quantitative analysis can provide useful environmental policy guidelines for pursuing "win-win strategy " in trad