Study on the utilization rate of EU-Korea free trade agreement and the role of the importer in utilization decision-making

The objective of this study was to gain more information on Free Trade Agreement utilization and the determinants behind it. The study was conducted using mixed research methods to answer the research questions: 1. What is the utilization rate of EU-South Korea Free Trade Agreement by Korean exports to Finland? 2. What is the role of the importer in Free Trade Agreement utilization decision-making and can it partly explain the utilization rate? Quantitative part of this thesis focused on producing and analyzing trade data to calculate the utilization rate. In the qualitative part, seven Finnish importers of South Korean products were interviewed. The results of this study are twofold. Firstly, importer has a significant role in the FTA utilization process and it should be considered to be one of the main utilization determinants. Importers role in utilization decision making depends on the level of awareness it has of the Free Trade Agreement. Based on this awareness it can either have an active role or an inactive role in deciding whether or not to utilize the preferential tariffs. Factors influencing FTA awareness are found to be firm size, market conditions and scale of trade. Secondly, the utilization rate of EU-South Korea Free Trade Agreement by Korean exports to Finland is significantly lower than expected. This study concludes that one of the factors that have influenced the low utilization rate has been Finnish importers low awareness of the Free Trade Agreement. Additionally this study found out that there is a positive correlation between the tariff margin and the utilization rate