The Trade Effects Of Regional Trade Liberalization

Since the global financial crisis in 2008,negotiations on WTO reform have been stagnant.People begin to focus on the negotiation of regional economic integration.The number of regional trade agreements(FTA)is increasing rapidly.FTA has become an important means for many countries to carry out international cooperation and competition.By June 2020,as many as 51 FTAs have come into effect in the Asian region,and 104 effective FTAs have been reached between Asian economies and non regional economies.The number of FTAs involving Asian economies accounts for more than half of the global total.As the largest economy in Asia,China has signed FTA with many countries since 2007,when it took free trade area as a national strategy.In 2013,in order to better cope with the impact of TPP high standard trade agreement on China,China established the first pilot Free Trade Zone in Shanghai.In the pilot Free Trade Zone,system reform and tax incentives were carried out,which promoted economic and trade exchanges between China and other countries.By 2021,China had established 21 pilot free trade zones.Can this kind of international free trade area and domestic pilot free trade area be explained by the same theory?What is the impact of regional trade liberalization on China's import and export trade?In addition,are there any connections between the international regional trade agreements and the domestic pilot free trade zones in addition to their conceptual differences?These problems are the motivation of this paper.This paper divides the forms of regional trade liberalization into multilateral trade liberalization(CPTPP),bilateral trade liberalization(Bilateral FTA signed by China)and unilateral trade liberalization(Domestic pilot Free Trade Zone)according to the number of contracting parties.They are all included in the framework of suboptimal theory,and the impact of various forms of free trade areas on China's goods trade is analyzed,And explore the relationship between various forms of trade liberalization.First of all,it is analyzed theoretically.According to the traditional international trade theory,economic globalization is an ideal state,which can realize the optimal allocation of resources and elements.However,in the real world,for their own interests,countries will intervene in international trade to protect the development of their own industries,which makes it a long way to realize global free trade.According to the suboptimal theory,various distorted terms of trade in international trade can be regarded as a kind of constraint conditions,and the optimal solution can be found under the constraints.WTO can be regarded as a kind of suboptimal choice under the economic globalization,and the regional trade liberalization can be regarded as a kind of suboptimal choice for the stagnation of WTO reform.This paper makes a theoretical analysis on the multilateral,bilateral and unilateral free trade zones.When a country chooses whether to join the free trade area,it will consider the exclusion incentive and free riding incentive comprehensively,and will consider whether to join the free trade area only when the welfare is increased.Previous theoretical studies have proved that in the establishment of a customs union or free trade area,as long as the import and export volume with countries outside the region is fixed,the internal welfare of the customs union or free trade area can be increased.However,in reality,a country often does not only set up a free trade area,but often enters into one or more free trade agreements with many countries.In theory,the wheel and spoke theory is often used to analyze this form of regional trade liberalization.Based on the latest research,this paper believes that the formed hub spoke structure is not a stable structure,Multilateral trade liberalization is a relatively stable structure.The unilateral pilot free trade zone can also be explained by the suboptimal theory.The existing high standard trade agreements have strict requirements,and it is still difficult for China to join this type of trade agreement.We should learn from the high standard international trade agreements,innovate the system in the pilot Free Trade Zone,and promote it to the whole country after the system is mature,It is helpful for the domestic trade rules to be in line with the international trade rules,and thus conducive to China's accession to multilateral or bilateral trade agreements.Secondly,it studies the trade effects of multilateral,bilateral and unilateral free trade areas,and analyzes their influence mechanism.It should be noted that regional trade liberalization is generally believed to have a comprehensive impact on a country's economy,not only on trade,but also on investment and employment.This paper focuses on the impact of various forms of regional trade liberalization on China's import and export trade,and then discusses the relationship between various forms of regional trade liberalization,but not much on the impact of regional trade liberalization on investment and employment.To investigate the impact of the multilateral free trade area(cptpp)on China's trade.Compared with the cptpp,China is a country outside the regional agreement.This part mainly investigates whether the establishment of the cptpp hinders China's export to the cptpp countries,resulting in a certain trade transfer effect.First,the paper analyzes the current trade situation between China and cptpp countries.Through the analysis of absolute trade volume,growth rate,michaely index and competitiveness index,it is concluded that there is a close relationship between China and cptpp countries,and the conclusion of trade agreement may have certain impact on China's export trade.Second,the gravity model is used for empirical analysis.It is considered that the establishment of cptpp hinders China's export to cptpp members.Further analysis shows that the establishment of cptpp is not conducive to the export of China's low-end products to cptpp members.Third,because the effective time of cptpp is still short,in order to better investigate the impact of cptpp on China's export trade,the tenth edition of GTAP database published in 2019 is used for prediction and analysis.It is found that the establishment of cptpp is not conducive to China's export,which is mainly reflected in hindering China's exports of grain and crops,livestock and meat,food processing and light manufacturing.It is found that RCEP can effectively reduce the adverse impact of cptpp on China's export.To examine the impact of bilateral free trade zones(bilateral agreements that China has signed)on China's trade.First,it analyzes the current situation of trade between countries that have signed bilateral agreements with China and China.The proportion of total trade volume between China and agreement countries in China's total trade volume has been growing since 2008.Through the analysis of competitiveness index,it is found that the share of global export and import market between China and the agreement countries is about30%,and there is certain trade complementarity between China and the agreement countries.Second,the gravity model,propensity score matching,double difference and other empirical methods are used to investigate the trade effect of bilateral free trade area.It is concluded that the establishment of the free trade area is conducive to promoting China's export and import,and is not conducive to China's import from non free trade area countries,but the trade promotion effect of the free trade area will gradually weaken as time goes on.Thirdly,the paper analyzes the heterogeneity of trade effect caused by free trade zone.According to the different income levels of countries that have signed agreements with China,it is found that bilateral trade agreements signed between China and high-income and middle-income countries promote the growth of total trade,while trade agreements signed with low-income countries have no significant effect on the growth of total trade.The same conclusion can be obtained by analyzing the export and import separately.According to the industry classification,it is found that bilateral agreements have a significant effect on the total trade volume of China's high-tech manufacturing sector,medium technology manufacturing sector and labor and resource intensive manufacturing sector;However,the sectors with obvious promotion effect on China's import by bilateral agreements are consistent with those with obvious promotion of total trade volume.Through the investigation of each free trade zone that has signed agreements with China,it is found that some free trade zones are not closely related to China.The trade volume between Iceland,Georgia,Maldives and other countries with China ranks below 100 in China's total trade volume,After signing free trade zones with Pakistan,Switzerland,New Zealand,Costa Rica and Iceland,China has not played an obvious role in promoting the total trade volume.This paper examines the impact of unilateral pilot free trade zones(11 pilot free trade zones established before 2018)on China's trade.First,the development status of the pilot free trade zones is analyzed.The size of the 11 pilot free trade zones analyzed in this paper is about 200 square kilometers,and their specific tasks have different emphases,but all of them can be attributed to the facilitation of trade and investment.Based on the provincial data,it is found that the growth rate of import and export in the province where the pilot free trade zone is established or the next year is faster than that of other regions.Second,the trade effect of the pilot free trade zone is analyzed empirically.Since the import and export data of each pilot free trade zone can not be obtained,this paper uses the data of the prefecture level city where the pilot free trade zone is located.It is found that the pilot free trade zone plays an obvious role in promoting the total trade volume and export of the local cities,but not the import promotion.Thirdly,the heterogeneity of the pilot free trade zone is analyzed.According to different geographical locations,it is found that the central and Western pilot free trade zone has a more obvious trade promotion effect on exports,while in the eastern region,affected by the Tianjin Free Trade Zone,it has a restraining effect on exports.Considering that Tianjin Free Trade Zone may be affected by the explosion of Tianjin port in 2015 and the adjustment of foreign trade structure in the integration of Beijing,Tianjin and Hebei,Tianjin free trade zone is excluded,The effect of the eastern pilot Free Trade Zone on exports is no longer significant.Based on the analysis of 22 prefecture level cities where the pilot free trade zone is located,it is found that some pilot free trade areas have failed to drive the obvious growth of local import and export,and the causes of this phenomenon are analyzed in detail.This paper analyzes the influence mechanism of multilateral,bilateral and unilateral free trade areas on trade effect.It is considered that the reduction of internal tariff rate and the strict regulation of rules of origin increase the trade barriers between China and cptpp countries,resulting in certain trade transfer effect.This paper analyzes the mechanism from three aspects: trade barriers,economies of scale and terms of trade.This paper analyzes the influence mechanism of the trade effect of unilateral free trade zone from the perspective of government system innovation,trade facilitation and investment facilitation.Comprehensive comparison,this paper argues that the multilateral and bilateral free trade zones between countries reduce trade barriers through tariff reduction,and promote the growth of trade;while domestic pilot free trade zones reduce trade barriers through institutional innovation and other measures.Both the free trade zones between countries and the domestic pilot free trade zones can promote trade growth by generating economies of scale and improving the terms of trade.Then,it analyzes the relationship among multilateral,bilateral and unilateral FTA.Firstly,According to the regulations of the Ministry of Commerce and the General Administration of customs,the multilateral and bilateral free trade zones belong to FTA,while the unilateral pilot free trade zones belong to the category of free trade zone(FTZ).The most essential difference between them is that the multilateral and bilateral free trade zones need to negotiate among countries to formulate trade standards and reduce trade barriers by signing agreements;while the unilateral pilot free trade zone does not need to negotiate with other countries,it is to set aside part of its territory for institutional innovation.In the short run,bilateral agreements and multilateral agreements can promote each other.In the long run,many bilateral agreements have the power to transform into multilateral agreements;and unilateral trade agreements are an important supplement to multilateral and bilateral agreements.Secondly,Analyzing the relationship between multilateral and bilateral agreements,both of them have their own advantages and disadvantages.The advantage of multilateral agreements is that the market space is large,but the negotiation time is often long,while the advantages of bilateral agreements are high flexibility and easy to reach,but the market space is relatively small.In this paper,the cptpp member states are divided into the countries that have signed bilateral agreements with China and those that have not signed any agreements with China.Through the econometric analysis,it is found that the impact of China's exports to the countries that have not signed the agreements with China is greater than that of China,while the impact of China's exports to the countries that have signed agreements with China is relatively small.Using GTAP database to forecast and analyze,it is found that China's export to at least three sectors of the CPPP countries(Japan,Canada,Mexico)that have not signed an agreement with China(Japan,Canada,Mexico)show negative growth,while China's exports to Singapore,a member of the cptpp that has signed a higher standard agreement with China,has maintained a positive growth in all sectors.Thirdly,Analyze the relationship between multilateral,bilateral and unilateral FTA.It is believed that the unilateral pilot free trade zone will learn from the multilateral and bilateral trade rules among countries,and make a comparative analysis with the provisions of the Shanghai pilot free trade zone and the terms of the cptpp.The gravity model and triple difference method are used to analyze the relationship between Shanghai pilot free trade zone and the bilateral free trade area signed by China.It is believed that Shanghai pilot free trade zone is conducive to China's signing of new trade agreements and upgrading of existing free trade agreements.Finally,the paper puts forward policy suggestions on the development of regional trade liberalization,and holds that China should actively promote the entry into force of RCEP,promote the upgrading of domestic industrial structure,pay attention to the domestic system reform and the construction of international economic and trade talents,and attach importance to the role of the pilot Free Trade Zone in promoting multilateral and bilateral agreements.The main innovations of this paper are as follows:Firstly,Both the free trade zones between countries and the domestic pilot free trade zones are put into the framework of the sub optimal theory,and they are the sub optimal products of trade liberalization.The so-called suboptimal is the optimal choice made under special constraints.The most ideal state of international trade is to realize economic globalization.However,due to the interference of external factors,there is a long way to go to realize economic globalization.The organization similar to WTO has become a suboptimal choice.However,with the slow progress of WTO reform,multilateral and bilateral agreements have become the second best choice;a country may also face the constraints of its own development and system when it joins the bilateral and multilateral trade agreements,and the domestic pilot free trade zone has become a second best choice.Secondly,This paper examines the various types of free trade zones that may have a greater impact on China's import and export trade,so as to consider the impact of regional trade liberalization on China's trade as a whole,so as to provide policy suggestions for China's development and response to the development of free trade zones.Thirdly,The relationship among multilateral,bilateral and unilateral free trade zones is discussed.It is believed that in the short term,the multilateral and bilateral FTA is a mutually reinforcing relationship,while in the long term,the multilateral FTA is more likely to be a stable state.The unilateral pilot free trade zone is an important supplement to the multilateral and bilateral FTA,which is conducive to the conclusion of multilateral and bilateral agreements.