| This dissertation will investigate the comprehensive impact of economic integration of a bilateral free-trade agreement (FTA) between China and Thailand. A computable general equilibrium model covering seven regions and 57 trade sectors is developed for this study. Within the free trade areas, bilateral import tariffs in all agricultural and industrial sectors among all members will be reduced to zero percent.; This study specifically explores the intersectoral effect of a China and Thailand FTA against the rest of the world to determine the possible consequences that would significantly influence trade negotiations on the leading sectors of China and Thailand. This study also examines the effects on the market factor including the labor market and focuses on the wage share earnings of skilled and unskilled labor.; In addition to eliminating the tariffs rates between China and Thailand, the simulations also alter the three types of elasticities throughout 11 key sectors. The model will measure the sensitivity of trade to changes in elasticity of primary factor substitution (ESUBVA), elasticity of substitution between domestic and imported goods (ESUBD) known as the Armington elasticities, and elasticity of substitution among imports from different sources (ESUBM).; The results obtained show that a bilateral trade agreement between China and Thailand would produce a significant benefit for participating countries. Welfare gains ranging from {dollar}422 million to {dollar}605 million would be realized within the China and Thailand free trade area. The welfare of other regions in the world, notably Japan and SEA4 (the South-East Asian Four), would experience a slight adverse effect due to trade diversion. A strong negative effect in Japan and the SEA4 would occur in the electronic and machinery equipment, chemical, rubber and plastic, and textile sectors.; The distribution of income issue is also addressed in this study. The simulation results show changes in real rates of return to the factors of production---land, unskilled labor, skilled labor, capital and natural resources---indicating the direction of the distribution of income. In the case of Thailand, the effects from the simulations will be more pronounced on capital than labor. The benefits from this trade agreement will fall more on the capital owner rather than labor. Nevertheless, the results also reflect that the income inequality between skilled and unskilled labor will decline. |
