The Research On Export Effects And Welfare Effects Of Free Trade Agreements

With the continuous development of globalization and international trade changes,countries no longer exchanging “cloth for wine”,products and services can be refined,divided and phased,and intermediate products such as raw materials,parts,capital products and service outsourcing can be produced and sold in various countries resulting in the global cross-border flow of products and services.This complex division of labor mode has driven the development of the global value chain.For common interests,countries increasingly sign trade agreements,forming increasingly complex trade network relations,the degree of economic globalization has been improved,and the global production network can provide global stability and continuous high-quality products,which further promotes the rapid increase of international trade.In this process,intermediate products,parts and final goods need to pass multiple cross-border transfer,which not only requires relevant trade policies,to support and coordinate the smooth product flow,also need to analyze the trade and welfare effects of trade policies,in order to evaluate the effectiveness of these trade policies.At present,China is speeding up the network of high-standard free trade areas to promote all-round opening-up to other countries.China signed the FTAs relatively late compared to developed countries,but it has developed rapidly.So far,China has signed19 free trade agreements involving 26 countries and regions,including the RCEP.Among them,seven FTAs have been signed with belt and Road countries,involving 13 countries.Although COVID-19 had a great influence on the world trade,but in 2020 the volume of trade between China and the free trade agreement partners grew up at about 3.2%,and free trade agreements on trade and investment between China and its partners growth plays an important role indicating that China’s participation in the free trade agreement will bring important influence to China’ s trade and welfare.Therefore,under the framework of analyzing the volume of trade imposed by free trade agreements,China’s participation in the free trade agreement will raise thinking about the following issues: Firstly,when intermediate goods can be purchased across borders in international trade,countries will be more closely linked through trade liberalization.Trade agreements have brought about substantial reductions in tariffs on final goods and intermediate goods,meanwhile the reduction of intermediate goods tariffs can reduce production costs of enterprises and ultimately increase the export of final goods.Then,based on the perspective that free trade agreements affect enterprises exports,how to use more detailed indicators to quantify FTA? When considering association between industries,what is the impact of intermediate goods tariff reduction shocks caused by FTA on enterprises’ export? What path will the tariff reduction impact of intermediate goods promote the export growth of enterprises? Secondly,trade liberalization and trade protection policies can be developed simultaneously.At present,global trade liberalization is constantly developing and progressing,and countries are constantly cutting tariffs and improving trade facilitation.Compared to tariffs that are at historical lows,non-tariff regulatory frictions such as the technical barriers to trade(TBT),have gained importance and have been increasingly implemented.So,based on the perspective that free trade agreements affect China’s exports,can free trade agreements be used to avoid the export losses of trade protection? Is there a bypass effect in FTAs? Finally,RCEP is the largest trade agreement in the world so far and the highest-quality trade agreement that China has participated in at this stage.In the framework of the analysis of free trade agreement on trade volume,this paper uses it as a specific case of the analysis of trade effects of free trade agreements.How does the implementation of the RCEP affect the welfare? What analytical method do we use?Based on the trend of using structural model(SM)to evaluate the welfare of trade policy,what would be the results of estimating the trade and welfare effects of RCEP applying SM? What welfare will the tariff cuts in RCEP bring to RCEP members and the rest of the world? What is the difference in welfare changes resulting from tariff reduction?India has withdrawn from the RCEP and Chinese Hong Kong announced its formal application to join the RCEP earlier this year.What will be the impact on the welfare of the two countries and the original RCEP members if they join the RCEP? How will the two countries’ accession affect their own welfare and that of the original RCEP members?Based on the above problems,this paper in combing literature at present stage and the free trade agreement with China under the background of the evolution trend of imports and exports,focusing on the micro enterprises export promotion effect,the bypass effect of FTA and macro welfare effects,applies empirical methods including econometric regression model and structure model to explore free trade agreements with the export effect and welfare effect.This paper is divided into seven chapters.Chapter 1 is the introduction,which mainly introduces the research background of China’s participation in free trade agreements,and puts forward the theoretical and practical significance,research ideas and methods,as well as research innovations.Chapter 2 is a literature review,focusing on the literature closely related to this paper,including the analysis paradigm and the trade effects of free trade agreements,and the related research on trade liberalization policy and trade protection,and the literature review,pointing out the research value and contribution.Chapter 3 analyzes the facts of China’s participation in the FTA.This paper summarizes and summarizes the phased tariff concessions of the FTA,and analyzes the changes of China’s import and export during the FTA from the perspective of import and export market,commodity structure and micro enterprises,laying an important foundation for the following research.Chapter 4 is free trade agreements and enterprise exports: Based on the perspective of China’s product tariffs.Using China’s customs data and WITS database from 2000 to 2016,from the perspective of the impact of free trade agreements on micro enterprise exports,this paper used the econometric regression model to explore the impact of input tariff reduction shock induced by free trade agreements on enterprise exports.Chapter 5 is free trade agreements and China’s export: Based on the perspective of bypass effect.This paper explores the export diversion under trade liberalization policy and trade protection policy.Based on the TBT notification of the United States and the fact that China and the United States have not yet established any free trade agreements,this paper uses a specific econometric regression model to identify the relationship between FTA,TBT and China’s export,explores the bypass effect of FTA on TBT from the perspective of the impact of FREE trade agreements on China’s export,and studies a completely different trade bypass motivation,as distinct from tariffs,quotas or sanctions.Chapter 6 is a study on the welfare effects of free trade agreements: based on the perspective of quantitative analysis of RCEP.This paper uses a structural model to make a detailed case study of RCEP and estimate its trade and welfare effects on China and other countries and regions.Chapter 7 is the conclusions and policy suggestions,which summarizes the overall conclusions of this paper,puts forward policy suggestions,and points out the research prospects.Through comprehensive application of literature review,historical analysis and empirical analysis,the following conclusions are drawn:(1)the export promotion effect of tariff reductions shocks on intermediate goods resulting from free trade agreements.The results show that: First,the input tariff reduction induced by FTAs could promote the export expansion of enterprises.When the impact of input tariff reduction shocks caused by FTA changes by one standard deviation,enterprise export will change by0.007 standard deviation.Second,enterprises with state-and private-owned,multiple production site,closer destination and core product are subject to more positive impacts of the input tariff reduction induced by FTA on exports.Furthermore,based on the enterprise-HS6-destination dimension,this paper identifies the export margin of enterprises,and finds that the input tariff reduction induced by free trade agreements mainly promotes the export expansion of enterprises along the expansion margin direction of enterprise and product dimension.Finally,this paper explores the relationship between intermediate goods tariff,import and enterprise export in detail,and finds that the reduction of input tariff induced by free trade agreement will drive the growth of intermediate goods import of Chinese enterprises.Under the background that GVC and import tariff changes will affect both import and export,Chinese enterprises can promote export growth through the learning effect and productivity effect of imported intermediate products.(2)The bypass effects of FTAs.Based on the FTAs and TBT notification of the United States,we address this question using detailed product-level trade data of the period 2000-2017 and US TBT notifications database.We show that,for the products covered by the US TBT notifications,Chinese exports to third countries that are part of the FTA trade bloc with the US are positively correlated to the imports by the US from the same countries.However,we do not find a bypass effect of FTA in evading technical barriers as regards trade with several other countries.Furthermore,the bypass evidence is stronger for countries near China that have similar institutional qualities,better political relations with China,a larger Chinese population,an FTA,and commonality in language with China,and where the rerouting cost is low for Chinese exporters.Our results suggest that,coupled with FTAs,the incentives of the TBT were strong enough to spur a new trade route,which is the bypass effect of FTAs.Traditionally,FTAs are utilized to avoid paying high duties by rerouting products.However,FTAs can also be preferred export platforms to circumvent non-tariff barriers,such as TBT.(3)Based on the analysis framework of the impact of FTAs on trade volume,a detailed case study of RCEP is conducted with the application of structural model to estimate the trade and welfare effects of RCEP on China and other countries and regions.The findings are as follows: First,the RCEP benefits from not all RCEP members to the final year.Specifically,the RCEP tariff reduction has a positive impact on the welfare benefits of Australia,Japan,South Korea,New Zealand,China and ASEAN.Among them,Korea benefits the most,secondary impact on ASEAN and Japan,and less improvement on China.Within ASEAN members,although ASEAN overall welfare performance is positive,there are negative impact in Singapore,Thailand and Vietnam.Moreover,after the reduction in tariffs,there are large differences in the sources of benefits,industry contribution and export specialization of different RCEP members,depending on country and industry.Secondly,there is a positive correlation between the tariff reduction and the inter-member benefits of the members,that is,the more the inter-member tariff reduction,the stronger the welfare improvement of the members.In addition,the inverted “U” correlation between benefits caused by RCEP tariff decline and GDP exists,that is,when the national GDP is below a certain critical threshold,there is a positive correlation between GDP and welfare,while beyond that critical threshold,the two show a negative correlation.Thirdly,if India does not join RCEP,its welfare will deteriorate.But if India joins RCEP,it will not only bring positive effect on its own welfare gains,but also to other countries especially to Vietnam and Singapore.Finally,Hong Kong’s accession to the RCEP will have a relatively small impact on RCEP members compared to India’s accession.Under the framework of exogenous tariff impact,this paper focuses on the export of micro enterprises,macro export of China from the bypass effects and quantitative analysis of trade agreements,uses two methods of econometric regression model and structural model to investigate the export and welfare effects of free trade agreements.The existing literature provides important reference for this paper.The marginal contribution of this paper is mainly reflected in the following three aspects:(1)in terms of research content,this papers constructs a more detailed indicator to identify the impact of free trade agreements on enterprises’ export based on the product dimension,and to identify the impact of free trade agreements from the country-product dimension that is time-varying based on the product perspective,thus expanding the research on the relationship between free trade agreements and enterprises’ export performance.Moreover,this paper estimates the FTA shock by the difference between MFN tariff and preferential tariff and the correlation between industries separating the impact of final goods tariff and intermediate goods tariff on exports.(2)The second contributions of this paper based on research perspective is mainly reflected on the use of free trade agreement platform to explore the evasion of non-tariff barriers,which has supplemented the literature on trade diversion,the specific channels of TBT influencing trade in the United States and the trade effects of FTAs.(3)The third contribution of this paper based on research method is mainly on the research methods of the application,different from the commonly used GTAP research methods to estimate the welfare of trade policy that to quantify the trade and welfare effects of RCEP tariff changes based on CP model of general equilibrium model.It also analyzes the relationship between trade cost,or GDP and welfare.In addition,this paper simulates the welfare effects of India and Chinese Hong Kong joining RCEP and performs counterfactuals.To sum up,this paper focused on the perspective of trade creation,welfare quantification and avoiding trade friction and used the 2000-2016 China Customs database,the import and export data and tariff data of all countries of the world in 2014,RCEP tariff commitment reduction table,Sino-US import and export and US TBT notification database.I use reduced forms and structural model to explore the causal relationship between the micro enterprise and input tariff reduction induced by FTA under the background of global value chain,estimate the bypass effects of FTA in evading TBT trade policy effect on enterprises to export considering the relationship between the trade liberalization policy and trade protection policy,and qualify the welfare gains based on the RCEP case.This paper systematically identifies the trade and welfare effects of China’s participation in FTAs from multiple perspectives.This paper explores the trade and welfare gains of China’s participation in FTA from multiple dimensions,which has rich and important policy significance for improving the quality and energy of China’s export:(1)Accelerating the development of a network of high-standard FTAs and promoting high-quality development of China’s trade.Firstly,the government will further improve trade facilitation,reduce import tariffs on intermediate goods,expand imports by enterprises,reduce the cost borne by enterprises,and promote import diversification to avoid dependence of China’s imports on a particular country,region or industry.Secondly,for export enterprises,it is necessary to rationally allocate enterprise resources,actively make use of geographical advantages in China,rationally arrange production sites and export destinations,and promote export expansion of enterprises.It is necessary to transfer enterprise resources to products with strong core competitiveness,reduce non-core products,and enhance the professional level of enterprise export.Thirdly,enterprises should improve the utilization rate of FTAs and enhance the positive effect of FTAs on Chinese enterprises’ export.The government should continue to promote FTAs,step up publicity,enhance the awareness of FTAs among enterprises,and improve the facilitation of implementation procedures for enterprises so as to attract more enterprises to take advantage of FTAs.Fourthly,we should attach equal importance to multilateral and regional agreements to increase the influence of China’s economic integration in Asia,win support from more trading partners,reduce the uncertainty of trade policies,and promote the promotion of trade rules toward to CPTPP and other high standards,so as to promote China’s construction of a high-quality FTA network facing the world.(2)China should seize the opportunity of RCEP to deeply participate in regional economic cooperation while improving its own competitiveness.First,actively take advantage of RCEP cooperation opportunities.China in accordance with the agreement promised to gradually reduce tariffs,continuous play to China’s trade competitive advantage,to improve the quality of trade rules,promote investment liberalization,strengthen the economic cooperation between China and RCEP members,promote domestic and international cycle and interactive development,and provide help for high-quality economic development.Second,based on the results of South Korea and Japan have biggest welfare gains in RCEP while China’s welfare gains is relatively low,China needs to constantly improve its innovation ability,improve its trade rules and formulation ability,enhance its core competitiveness,and strive to narrow the gap between China and developed countries such as Japan and South Korea.For example,we will accelerate the transformation and upgrading of the computer,electronics,textile,automobile,electrical,machinery and other industries to high quality and high added value,build a regional industrial and supply chain cooperation system with ASEAN,Japan and South Korea,and promote the integrated economic development of Asia.Third,we should also pay attention to the possible problems of future unequal distribution of interests,and call for,encourage and support non-RCEP members such as India and Hong Kong in joining the RCEP.Fourth,we will give full play to the active role of local governments,accelerate the building of RCEP economic and trade cooperation demonstration zones and promote the implementation of the RCEP in China.(3)By building a “Belt and Road” dispute settlement system,resolve or ease the interest conflicts between members,accelerate the in-depth economic and trade cooperation between China and “Belt and Road” countries,balance the orderly and balanced development of trade among all countries,and create a favorable environment for the increase of quantity and quality of China’s FTAs.First,promote the development of the “Belt and Road” national dispute settlement mechanism through substantive dual-multilateral cooperation agreements.As the proponent of the “Belt and Road”,China should make full use of this identity to materialize China’s concept of international cooperation into the substantive rules,so as to promote the enrichment and development of the international dispute settlement rules.Second,to explore the design of targeted dispute solutions.Give full play to the advantages of policy communication between “Belt and Road” countries,establish and improve the consultation and communication mechanism and the rapid response channel,improve the arbitration system,establish a list of arbitrators,standardize and unified judgment standards,and establish the arbitration award review system.Third,establish a “Belt and Road” dispute settlement and coordination function along with the Asian Infrastructure Investment Bank.(4)Establishing a mechanism for handling trade frictions under the background of impact of the epidemic and “anti-globalization”.First,under the prevalence of trade protectionism,we will establish a trinity of trade friction early warning mechanism,increase the benign interaction between the three parties in the international and domestic market environment,and improve China’s ability to impact on the external market.Second,China’s exports can be more inclined to the partner countries of signing FTAs with China,ASEAN,“Belt and Road” countries and regions,the EU and African countries,and implement the strategy of diversified export markets.Third,enterprises can overcome the negative impact of traditional trade frictions and trade barriers by means of export diversification and reasonably use FTAs to reasonably avoid the negative impact of non-tariff barriers on exports resulting in bringing new export growth points.Fourth,the government should focus on supporting large enterprises,key enterprises,multi-product enterprises,high-tech industries and enterprises,as well as industries and enterprises with obvious economies of scale,expand the scale of their goods,improve their value chain.When products encounter foreign trade barriers,above enterprises could use the strategy of export product diversification,which can completely prevent the decline of output and export transition in key industries,and affect employment and stability.