Bilateral Free Trade Agreement: Theoretical Reconstruction And Empirical Research

Since 1990s,there has been so great development of regional economic cooperation and regional trade liberalization all over the world when bilateral free trade becomes the most significant feature of global regionalization.This paper tries to systematically explain the formation and development of bilateral free trade agreement (hereafter FTA) with the establishment of new FTA theoretical framework,which is composed of market share,level of industrialization,the number of signed FTAs, product substitution and initial external tariff rate.The data statistics,gravity model and numerical simulation are all applied to provide practical support for the new framework, then bilateral FTA theoretical reconstruction and empirical research are to be finished thoroughly.Firstly,this paper retraces the history of regional economic integration and accounts for the whole process of three regionalization waves.Focusing on the fourth wave of the world regionalization,the paper elaborates the status quo of bilateral FTA in China and other countries and also summarizes the historical process of China's participation in regional economic integration.Secondly,based on lots of forefront literatures at home and abroad the paper proposes a new theoretical framework which is composed of unilateral trade liberalization,bilateral free trade and FTA network,in order to develop the theory on FTA formation mechanism.Thus,the reconstruction of bilateral FTA theory reaches to be completed.Thirdly,the paper advances many independent opinions about the development and evolution of external tariff policy in the United States and reinterprets the policy alternation in past two U.S.governments between WTO multilateral system and the bilateralism.At the same time,the motives and economic effects of ASEAN's FTA and its regionalization strategy are analysed and evaluated.Finally,the paper makes use of the revised gravity model based on panel data to estimate trade flow effects of China's FTA after depicting a panorama of China's current bilateral free trade areas.Numerical simulation by Matlab 7.0 under new theoretical framework helps to achieve the optimal sequence of our signatory countries maximizing the benefits of trade liberalization.Of course,the paper predicts and ascertains the negotiation partners and cooperation strategy of China's FTA,and then proposes some specific policy suggestions with the implementation of China's free trade area strategy in new wave of the regionalization.