Trade Effect Of European Eastern Enlargement And Influence On Sino-European Trade

In May 1st, 2004, ten countries including Estonia, Lithuanian, Poland, Czech Republic, Slovakia, Hungary, Slovenia, Latvia, Cyprus and Malta entered European Union (EU), which was the fifth enlargement. In January 1st, 2007, jointed with Bulgaria and Romania, EU finished the largest enlargement in history. Now, EU has 27 members which population reaches 490 million with 3 million increases and area reaches 4.6 million kilo square with 300 thousand enlargements. After enlargement, the value of foreign trade of EU shares 20% of world, and GDP becomes $14000 billion which shares one quarter. EU becomes the largest and potential market.The most prominent feature of this enlargement is that there exits huge discrepancy between new members and original countries in the economic development level. It is necessary to analyze economic effect on EU through tests of economic periodicity and homogeneity among members. Due to complementary trade structure, enrollment of new members may lead to re-adjustment of internal and external trade flow of EU, which would impact on trade of original countries, new members and none-EU countries. Since the establishment of relationship between China and EU, bilateral economic and trade relations develop rapidly. Now, EU has become China's largest partner. With EU eastern enlargement, the China-EU trade relations may be effected unfavorably because of similar economic level of China and new members, similar structure of export products, EU's trade protectionist and advantage of geographical location and transportation of new members. Therefore, it is meaningful and significant to study the effect of EU eastern enlargement on Sino-European trade for better cooperation between China and EU.This paper discussed from seven parts. Chapter 1, the preface introduces the research background and paper framework. Chapter 2 is literature review. Articles summarize the research way and conclusive of previous papers which are prepared for academic basis. Chapter 3 is to recall the history of EU enlargement and trade diversion impact of prior four times. Then it is to analyze investment effect and trade effect on members due to test of economic integration of members and economic output formula. Chapter 4 is empirical analysis about trade diversion impact on Sino-European trade with gravity model. It would test from two aspects total national trade and industry trade flow. Chapter 5 is to explain the reasons for trade diversion effect on Sino-European trade from three aspects. Chapter 6 is recommendations and advice for China to put forward on how to deal with the disadvantage impact. Chapter 7 is conclusion which sums up the results and shortcomings of this paper and specifies the next step for research.