Trade liberalization benefits consumers because it gives them access to a larger number and a wider variety of products, at lower prices, than their home country could supply. The principals of comparative advantage and specialization are well known. Competition from the increased availability of imported goods to domestic consumers also forces domestic firms to offer competitive prices, to improve production efficiency, and to innovate. Trade liberalization also presents domestic firms the opportunity to export their products and services to other countries, stimulating domestic growth.
While consumers as a whole are winners from free trade through lower prices and greater varieties, however, certain groups such as displaced workers in the import competing sectors are adversely affected due to increased imports. Much of the existing literature concerning trade liberalization focuses on the impact of trade on aggregate variables, such as the growth of GDP and GDP per capita, or net welfare effect on the economy as a whole. Although there is a general recognition that trade liberalization benefits consumers, there is only a handful of empirical research that investigate the direct impact of trade liberalization on consumers.
In this study, we examine the economic impacts of trade liberalization and estimate the impact of increased variety on the consumer welfare. In particular, within a CES framework, we develop an import price index that is corrected for new and disappearing varieties, by employing Feenstra (1994)'s approach and using Korea’s trade data. New varieties lower the unit-costs depending on their substitutability with other varieties and their expenditure shares. Further, a case study on major consumer goods that are imported by Korea was conducted in this paper. We have investigated the marketing margin of these consumer goods from the border to final consumers and estimated the margin stage by stage for each marketing channel.

Key findings of this paper are summarised as follows:
• Korea has continuously liberalized its domestic market since the mid 1980s. During the Uruguay Round (UR) negotiation and subsequent implementation process, Korea has reduced its bounded tariff voluntarily. As a result, the level of a weighted average tariff was reduced to 5.1 percent in 2011 from 11.3 percent in 1995. The reduction of import tariffs has contributed to the reduction of import prices denominated in domestic currency (Korean won). Nonetheless, final consumer prices do not show any trend of decline according to simple data plots in our investigation despite the reduction of import prices measured at the border. This tells us that there must be some price deteriorations in the process of domestic marketing channels for imported consumer goods.
• Although increased product variety is generally believed to bring welfare gains, standard national measures of welfare and prices do not assess how much better off consumers are when a new variety of an existing good or a new good becomes available. Both the import price index and the consumer price index (CPI) largely fail to capture the introduction of new varieties and the increase in the standard of living that new varieties bring about.Our recalculation of the import price index using Korean data suggests that the variety-adjusted index fell 20 percent faster than the conventional index between 1992 and 2011. To calculate the impact of variety growth on consumer welfare, we have to make an additional assumption about how the increased availability of foreign varieties affects domestic production. With the assumption that the number of domestic varieties is unchanged, we can proceed to estimate the impact of variety growth, due to the continuous expansion of trade liberalization on the well-being of Korean consumers. We found that the official import price index understates the rate of decline in import prices by 20 percent over the two decades from 1992 to 2011. If we take the average import share of Korean GDP for the past 20 years, which is 30 percent, then the value to consumers of the increase in global variety is in the range of 8.3 percent and 21.7 percent  of GDP in 2011, or roughly 93 to 243 billion US dollars depending on the estimates of elasticities of substitution. This sum represents what consumers would be willing to pay to have access to the expanded set of varieties available in 2011.
• We have further investigated the domestic marketing channels of some major imported consumer goods. Main findings of the investigation are summarized as follows:
- Most of imported manufactured goods, in particular, small household appliances are supplied by only one company. In other words, an overseas affiliate has virtually the monopoly power on household appliances in the Korean market.
- The marketing margin of imported goods is in general two or three times higher than that of domestic products.
- The marketing margin generated at the retailing stage is higher than that at the wholesale stage.
- Fair competition is one of the effective ways to reduce marketing costs of the imported goods including the marketing margin.
 
Policy implications derived from these findings are as follows:
• Fostering fair and competitive environments in the domestic market of the imported goods would be one of the most effective ways for reducing the marketing margin of the imported goods on the whole, and resulting in a decrease in consumer prices of those consumer goods, and hence ensuring gains from trade entertained by final consumers.
• Organized efforts by civil organizations and NGOs or consumer groups such as frequent consumer price reviews on imported goods and relevant monitoring activities should be encouraged for the benefits of consumers themselves.

서 언 

국문요약 

제1장 서 론 
1. 연구의 필요성 
2. 연구 목적 
3. 연구 범위와 내용 및 한계 

제2장 무역자유화의 진전과 소비자후생효과에 대한 논의 
1. 평균 관세율의 변화 
2. 소비재 가격지수의 변화 
   가. 소비자물가지수의 변화 
   나. 주요 소비재의 수입가격 변화 
3. 수입관세 철폐의 소비자가격 인하효과 논의 
   가. 소비자가격 하락에 영향을 주는 요인 분석 
   나. 소비자가격 인하효과 체감의 어려움 
4. 소결론 

제3장 무역자유화의 후생효과: 실증분석 
1. 연구 배경 및 선행연구 
2. 이론적 고찰 
   가. 관세철폐 효과 
   나. 상품다양성 증가효과 
3. 자료 
   가. 대상품목 선정 
   나. 상품다양성의 증가 
4. 실증분석모형 
   가. 핀스트라(Feenstra) 가격지수의 확장 
   나. 정확한 물가지수와 람다비율(lambda ratio) 
5. 실증분석 결과 
   가. 분석결과 I: 대체탄력성 추정 
   나. 분석결과 II: 정확한 수입물가지수 및 소비자 이익 추정 
6. 소결론 

제4장 무역자유화의 후생효과: 사례분석 
1. 주요 소비재가격의 국제비교 
2. 주요 수입 소비재의 국내 유통마진 분석 
   가. 칠레산 포도 
   나. 수입 축산물 
   다. 소형 가전제품 
   라. 국내 동종 제품과의 유통마진 비교 
3. 소결론: 경쟁제한 시장구조에 따른 가격왜곡 

제5장 결론 및 정책 제언 
1. 요약 및 결론 
2. 정책 제언 
   가. 환율 등 거시경제의 안정 
   나. 소비재 중심의 빠른 관세철폐 
   다. 유효한 국내 경쟁환경의 조성 
   라. 소비자활동의 강화 
   마. 상품다양성 증가를 반영한 홍보 강화 

참고문헌 

부 록 
부록 1. 소비자물가지수 전 품목 
부록 2. 분석에 사용된 자료 설명 
부록 3. 한국무역협회의 소비재 분류 기준 
부록 4. 공정거래위원회의 수입상품 가격조사 결과 
부록 5. 주요 소비재의 유통마진율 

Executive Summary