Study On Adjustment Cost Of China-Asean FTA By Analyzing Trade Structure Between China And Asean

On Nov.4th,2002,China and Asean(Association of Southeast Asian Nation) signed《Framework Agreement on Comprehensive Economic Co-operation between thePeople's Republic of China and the Association of South East Asian Nations》 inwhich parties have their respective applied MFN tariff rates gradually reduced oreliminated in accordance with specified schedules and rates over a period from 1January 2005 to 2010 for ASEAN 6 and China.. CAFTA (China Asean Free TradeArea) will be one that has the biggest population among free trade areas,the biggestone among free trade areas organized by developing countries,the third biggest freetrade area after EU (European Union) and NAFTA (North American Free TradeAgreement). In the last decade,trade between China and Asean increased rapidly,andthe economic linkage was deepened. In the long run,trade liberalization is beneficialfor it may lower costs,increase intra-regional trade and investment,increase economicefficiency; and create a larger market with greater opportunities and larger economiesof scale for the businesses of the Parties. But in the short term,worrying about thesimilarity of trade structure between China and Asean,it also means the competition oftrade structure,would cause high adjustment cost during the economic integration suchas significant injury,unemployment,irrationality of economic structure,balance oftrade deficit and instability of exchange on industry competition,the partnergovernments would hesitate over the economic integration. So the study on theadjustment cost of China-Asean free trade makes significant sense for the schedulingof economic integration. The theoretical basis is: the goal of government is to improve the welfare of thepeoples of the countries, keep the steady-stated economic growth,reduceunemployment,prevent disequilibria,cultivate industry competition and so on. If the福州大学硕士学位论文trade structure is competitive,the trade liberalization would cause drastic trade warfareand in the competition the less competitive industry would be injured therefore wouldshrink. Government would consider this disadvantageous and may rein in schedulingof liberalization. Vice versa,if the trade structure is complemental,the adjustment costwould be low. The impact of competition to adjustment cost differs fromintra-industry to inter-industry. According to SAH (Smooth AdjustmentHypothesis),since labor,technique and management are more similar in intra-industrythan that in inter-industry,the adjustment is easer in intra-industry than that ininter-industry. So the adjustment cost is lower in intra-industry than that ininter-industry. Within the framework of this theory,collecting a mass of trade data of China toAsean (five countries),China to world and Asean (five countries) to world from 1992to 2001,by combining intra-industry trade GL index,adjustment GLindex,intra-industry trade contribution formula,net trade ratio NTR index,and Pearsoncorrelation of NTR (processed by SPSS),the thesis analyzes China-Aseanintra-industry and competition of trade structure. Based on the result,the conclusion isdrawn in the end that the adjustment cost of China-Asean free trade area is low.