This paper analyzes the economic effects of the direct payments provided by the FTA (free trade agreement) special law to compensate for the income loss in agriculture resulting from the market opening via FTAs. The conditions necessary to sufficiently compensate for the agricultural income losses are explored. An empirical analysis is also conducted by applying the framework theoretically developed to the Korea-U.S. free trade agreement case. This study demonstrates that the value of θ, which is exogenously determined by government, plays a critical role to effectively compensate for the income loss. The results of the empirical analysis show that the existing direct payment program has little effects on making up for the agricultural income losses since the current value of θ 0.8 is too small.