The Economic Effects Of China - New Zealand's Bilateral Free Trade Area Analysis

After World War II, peace and development had been two main themes, and thus a big leap for free trade. Multilateral trade mechanism had the biggest chance to thrive it can witness in the past few centuries. On January 1st,1948, GATT emerged. In the next few decade, it had managed to reduce tariffs of over 100,000 sorts of products, and had more than 130 memebers. Meanwhile, bilateral trade florished with lots of FTAs signed. The miniature for most successful regional organzition European Union had emerged in 1952. Back at that time, those FTAs shared some common properties, geographically close to each other, similar economical structure and political system..With the development of aviation and shipping industries, the transporting fees are no longer an issue. So transnatioanl FTAs spung up like mushrooms.China is the biggest trader in the world. Although China has long been a member in WTO, the number of cases against China has increased over the past decade. The cases included not just the tranditional charges such as anti-dumping, anti-subsities, but also some new kinds such as specific safeguard measures. Countries involved consist of developing and developed countries. To avoid conflicts, joining in a FTA become an option. What is more, since subprime crisis, America, the biggest buyer of Chinese products, had entered recession. This will lead to a significant decline in China's trade volume. High unemployment rate has forced protectionists to ask for more help from government. It will be more difficult for China to trade its goods with the US. Therefore, FTA seems to be a good way to solve this problem.Given current conditions, it is of great importance to study on this subject in the prospective of theory and practice. This article focuses on Sino-New Zealand FTA, the first one between China and a developed country. FTA is different from Customs Union, however, the methods and theories used to analyse the Customs Union can be applied to FTA. Sino-New Zealand FTA is new-founded, so the effects of FTA can go either way. By calculating TC indexes, RSCA indexess and so on, it is found that China and New Zealand do have the basis to cooperate more and bulid a FTA. In the essay, gravity model is also used to simulate the effects FTA can bring on Sino-NZ trade volume. The conclusion is it did work and it will work more in the future. On the basis of comparison with ASEAN, some advice on polices those should be implemented are provided.