A Dynamic Computable General Equilibrium Research On The Trade Liberalization Of Mechanical And Electrical Products Among China Japan And Korea

Nowadays, the proposed FTA of China, Japan and Korea has become the concerning focus of the whole world. However, due to several different status among the three countries such as the stage of economic growth and the strategic interests, all-round FTA of China, Japan and Korea can not be achieved in the short term. Accordingly, it is the best choice to carry out the free trade from the industrial level to all levels. It is obvious that the mechanical and electrical industry is the pillar industry and there are still a lot of trade negotiations in this industry among the three countries. Therefore, the trade liberalization analysis of the mechanical and electrical industry is of great significance to the FTA establishment of China, Japan and Korea.The article firstly introduced the current trade situation of the mechanical and electrical industry. Based on the RCA index, it analyzed the trade competitiveness of the mechanical and electrical products in the three countries. Then, presenting the development of the CGE theory, the article discussed the mathematical structure, data structure, dynamic update and the model solution algorithm in detail. In the empirical research, the article expanded the initial MCHUGE model including the split of the model database, the construction of several industries and the setting of import and export trade module equations. Combining with the economic characteristics of Chinese economy and the production features of the electrical and mechanical industry, then the economy of scale, the imperfect competition and the product variety were added to the extended model to exhibit the realistic economic environment. By means of modifying the model, the article simulated the impact of the mechanical and electrical products trade liberalization among China, Japan and Korea in the condition of perfect competition, which is consist of GDP, the gross investment, the aggregate consumption, the general import and export. Secondly, the article demonstrated the impact of trade liberalization policy in the event of imperfect competition.The results indicated the mechanical and electrical products trade liberalization had a negative effect on the balance of trade, the terms of trade and automobiles and parts output while it promoted the other macro variables and the output of the mechanical and electrical industry. And in the long term, with rising prices of the essential productive factors and the intermediate input products, this forceful impact on the macro economy in China will be slowly decreased. However, compared with the base period, there is still an appreciable impact. In view of the imperfect competition in the mechanical and electrical industry of China, the machinery product trade liberalization will give greater influence on the China's economy and the output gradually climbed back in the long term.