A Study On Economic Effect Of Pan-East Asian Integration

Today in the context of globalization, the trend of integration intensifies continually. In order to achieve true integration in Asia, it's essential for cooperation between China and India, which has reached one-third of the world's total population. The"10 +3"and the"South Asian Association for Regional Alliance"is only the first step for Asian integration, and the construction of China-India Free Trade Area (CIFTA) is the second step which is crucial as well. Meanwhile, the building of FTA in East Asia has intertwined, and the progress of regional cooperation in East Asia is quite variable. If China and India achieve CIFTA (S1), there maybe expand three other scenarios dynamically, namely, China-India-ASEAN FTA (S2), China-India- ASEAN-New Zealand-Australia FTA (S3) and the "10 +6" EPA plan (S4).When China is currently facing so many of the FTA negotiations, what kind of impact will be brought for China and other related countries? How CIFTA as well as other three possible regional cooperation programs based on it effect member-nations'economy? These questions lead to the major idea of this article. In this paper, from the traditional comparative static framework of CGE model firstly, we analyze the economic effect on member-nations of these four scenarios from aspects of GDP, trade scale, bilateral trade, national welfare, trade structure and output levels. Subsequently, through the dynamic mechanisms of investment, the endogenesis of price, consideration of the resource constraints and the alternativity between productive factors, this paper completed the historic simulation to update key data, then built the closure criteria for baseline simulation, combined the dynamic recursive methord, finally assessed the long-term impact for member states in terms of policy changes under 4 scenarios. Different to the analysis from perspective of comparative static, the assessment of long-term economic impact was started from the macroeconomic point of view and import and export trade to reflect the relationship between short-term influence and long-term impact under 4 kinds of possible policy changes.In this paper, we used the GTAP model and its database, combined dynamic recursive methord, and analyzed the specific economic effect in 4 different scenarios for China, India, ASEAN, Australia, New Zealand, Japan, South Korea, and other non-member nations. Based on the empirical results, we draw up the following conclusions: 1) In this paper, the main line of research is focusing on China's active motive in participating East Asian economic integration. As one of the host countries under four simulation programs, China gains positive impact under each program because of the"first advantage"effect, and China wins the most economic benefit in S4. That is, the broader the scope of trade liberalization is, the more benefit China achieves from it. Therefore, this point confirms the correctness and effectiveness of FTA network. However, because of differences in industrial competitiveness as well as the different status in trade arrangements, there exist the unbalanced distribution of benefits among member states.2) India's dominant strategy is to establish FTA positively with China, ASEAN, New Zealand, and Australia. After all, S1, S2 and S3 are beneficial to India, these partners which are developing countries or developed countries with very small scale of economy would not pose a threat to India. At the same time, India should minimize the risk of building FTA with Japan and South Korea, because at the current economic situation India has no ability to respond to severe negative impacts from Japan and Korea.3) ASEAN has access to significant economic improvement in S3 and S4. Even though Japan and Korea have healthy competition wiht ASEAN, which lead to the result that the GDP growth for ASEAN in S4 is less than in S3, the gains of civil welfare for ASEAN in S4 is more than in S3. Generally, to participate in FTA negotiation is the dominant selection for ASEAN. Therefore, under this background, ASEAN should make active use of the axle position, play the role of springboard to achieve the"10 +6"economic cooperation.4) Along with New Zealand and Australia's affiliation to the FTA process in East Asia, the positive effects on other member states is rather limited compared with S2, but significant for their own economic interests. On the contrary, because the two countries'foreign trade volums are deflected towards East Asian gradually, if they are excluded outside of East Asia FTA alone, they would suffer servere economic losses. In this sense, the winning stratege for New Zealand and Australia is to ensure their status in East Asian FTA.5) If Japan and Korea are excluded from the FTA in East Asia, they would suffer significant negative economic impact, and with the expansion of the FTA, the negative effects will be greater. In contrast, if they successful become the member countries of East Asian FTA, the two will receive most of the economic improvement and well-beings. Therefore, as important countries in East Asia, Japan and South Korea will not lose enthusiasm in building self-centered FTA network.6) Under dynamic conditions, changes in macro-economy and trade for member countries remained the trend in relatively static state. There still exist the situation that mebmer nations gain economic and welfare improvements while non-member nations suffer economic losses and welfare depravation, and the disequilibrium in distribution of benefits between member countries will be further expanded and even more evident. The sub-optimal condition shaped under comparative static state will not be improved in the long term.