This paper presents a general equilibrium model that analyzed the impact of trades between North and South Korea on the regional distribution of industries. We found that the economic interaction is limited to the trade of goods and services the manufacturing industries concentrate more severely in South Korea. Even if the investment of South Korean capital in North is allowed, it doesn`t necessarily take place. South Korean firms will actually build a plant in North only if the start-up cost is less than the sum of reductions in the transportation cost and the production cost. The South Korean government`s investment in the infrastructure within North Korea encourages relocation of South Korean firms, which targets the North Korean domestic market, in North. On the contrary, the South Korean government`s investment in the infrastructure between South and North Korea discourages such a movement.