Research On Welfare Effect And Its Distribution Of The Development Of China-ASEAN Free Trade Area

International Trade Theory believes that through international cooperation, one country can utilize its own resources and preferential advantages to promote its economy and welfare. The core objective of doing international trade is to pursue welfare effect brought by trade gains. Consisted of Net Barter Terms of Trade, Income Terms of Trade, Single Factor Terms of Trade and Double Factor Terms of Trade, Terms of Trade is a set of system of evaluation, which can be used to analyze welfare effect and its distribution that one country gained after engaging international trade. ASEAN has taken Hongkong's place to be China's No.4 trade partner in 2007 and China-ASEAN Free Trade Area has been playing an important role in both China and ASEAN's economy and regional stability. However, the sustainable and stable development of a Free Trade Area requires not only the pursuit of welfare effect but also its fair distribution. Because if it is not distributed fairly among member countries within Free Trade Area, those who didn't receive fair distribution may have less motivation to continually participate in the development of Free Trade Area, resulting an ill or unstable development. So in order to determine whether or not that China-ASEAN Free Trade Area has such problems, this paper used data from UN Comtrade and took the approach of Terms of Trade to study welfare effect of China-ASEAN Free Trade Area and its distribution within it. And we reached a conclusion that welfare effect of China-ASEAN Free Trade Area has been enhanced and that its distribution within China-ASEAN Free Trade Area is not fair to all member countries. Finally this paper provides several suggestions to address the unfairness so China-ASEAN Free Trade Area may enjoy a sustainable and stable development.