A Study On The Economic Effects Of China's Free Trade Area Strategy

A free trade area(FTA)based on international agreements refers to a regional economic integration organization established by two or more countries and regions through the signing of agreements to reduce or eliminate tariffs and related non-tariff measures.In the 1980s,the momentum of economic globalization began to accelerate,and the wave of trade liberalization in the world was gradually rising.However,China's strengthening of the layout of the free trade area began in the late 1990s right after the Asian financial crisis.FTA construction has become a national strategy in the report of the 17th National Congress of the Communist Party of China that put forward the implementation of free trade area strategy to strengthen bilateral and multilateral economic and trade cooperation.Besides,the report of the 18th National Congress of the Communist Party of China further pointed out that we should accelerate the implementation of FTA strategy in response to the new round of regional economic integration trend.Under the circumstance of China's New Normal,the connotation of FTA strategy mainly reflects in the adherence to the rules of the World Trade System and bilateral,multilateral,regional and sub-regional economic cooperation,then gradually forming a FTA network based on neighboring countries,extending to the countries along the "One Belt and One Road" strategy and facing the world finally.In order to comprehensively analyze the economic effects of China's FTA strategy,this dissertation divides China's FTA strategy into two types and three stages,namely,two types of South-South FTA and North-South FTA,and three stages of completed FTA,FTA under construction and proposed construction.Therefor,this dissertation covers these classification characteristics in seven chapters,and the main contents are as follows:Chapter 1 is the introduction.This chapter maily introduces the background and significance of this dissertation,combs the research results of different types of FTA,FTA's economic effects,trade effects and influencing factors of outward foreign direct investment(OFDI),expounds the research ideas and research methods,and points out the innovation and shortcomings of this dissertation in the end.Chapter 2,theoretical basis.This chapter briefly review the related theory,including the international trade theory,the theory of regional economic integration and the theory of OFDI,and then builds a theoretical model to analyze the economic effect of FTA.On the basis of the utility functions and the constraint conditions of the representative consumer,the enterprise and the industrial product market,the model introduces the import tariff variable and the North Country.The results show that the reduction of tariffs is beneficial to improve the capital and labor income ratio of the relevant trading countries,and then improve the welfare level of the residents.Besides,the more the number of countries,the more significant the welfare effect of reducing tariffs.By comparison between the North-South FTA and South-South FTA,we find that the North-South FTA has stronger economic effects on the South Country.The analysis provides important theoretical support for empirical research and simulation analysis in later chapters.Chapter 3,the development process of China's FTA strategy and its economic effects.As of the end of 2016,China has signed 14 regional trade agreements that involving 22 countries and regions in addition to Hong Kong,China and Macao,China.The study argues that the establishment of FTA significantly enhances the scale of China's import and export trade and OFDI for FTA partners.In addition,the level of economic development,economic openness,political environment,inflation level and exchange rate environment are important considerations for China's choice of FTA partners.Chapter 4,the economic effects of China-Switzerland FTA.For the completed FTA,this chapter chooses China-Switzerland FTA as a sample that is the first FTA connecting China and the European continent countries.We find that among "China-Switzerland Free Trade Agreement",Switzerland's customs duties on imports on originating produces will be eliminated or reduced more remarkably.Nearly 90%products' tariff rate in Switzerland,including all industrial products and most of the agricultural products,would be reduced to zero.Empirical research shows that China-Switzerland FTA has significant trade and investment effects.Not only China but also Switzerland,the tariff diminution of both sides can notably promote China's export and import trade to Switzerland and the scale of OFDI.The results can provide a reference for the joint research of upgrading China-Switzerland FTA.Chapter 5,the economic effects of the Regional Comprehensive Economic Partnership(RCEP)agreement.For the FTA under construction,this chapter selects the largest RCEP agreement in Asia as the research object.The agreement covers 30.69%and 48.57%of the global GDP and population.By analyzing the trade relations between China and other member countries,we find that China's trade relations with ASEAN 10 countries,Japan,Korea and Australia are relatively close,and trade ties with India and New Zealand are relatively alienated,but trade relations with Japan and Korea exist deterioration signs.Based on the GTAP 9 database and the computable general equilibrium model(CGE),the results show that the RCEP agreement and the establishment of the regional FTA have a certain boost effect on the Chinese economy,especially the RCEP agreement and the China-Japan-Korea FTA have more obvious superposition effects.If the China-Japan-Korea FTA is established at the same time,the trade conditions of China's chemical products,metal products,automobiles and transportation equipment,electronic equipment,other machinery and equipment and other manufacturing industries may not be optimistic.Chapter 6,the economic effects of China-EU FTA.For the FTA under proposed construction,this chapter selects the European Union(EU),a major developed economies as China's potential FTA partner.The results indicate that China-EU FTA will have significant positive impacts,as reflected in stimulating bilateral economic development,promoting export and import trade,improving bilateral trade conditions,raising the level of welfare to a certain extent and optimizing the pattern of bilateral international division of labor.However,the trade condition of China's automobile and transport may be adversely affected.Considering the impact of Britain exiting from the EU,if a FTA is established between China and Britain alone,the economic effects are relatively weak.Chapter 7,research conclusions,policy recommendations and research prospects.This chapter maily summarizes the full-text research and puts forward some related policy recommendations,including accelerating the implementation of the FTA strategy,developing the outward foreign direct investment on the basis of peripheral countries,accelerating the transformation and upgrading of the industrial structure,improving the international competitiveness of the high-end manufacturing industry and implementing the positive "import promotion strategy".