Study On The Economic Effects Of Building FTA Between China And Australia

In the past 20 years, with the promotion of the world economic liberalization, we have seen the fast development of the regional trade agreement. It contains a few multilateral trade agreements, but the main trend is bilateral trade agreement. Both China and Australia are the members of APEC. Since the establishment of diplomatic relations between the two countries, they have always maintained a healthy and sound economic trade exchanges. The two sides has become an important economic partner. China and Australia agreed to commence negotiations on a Free Trade Agreement (FTA) on 18 April 2005. Because of the dynamic complementary relations in element endowment and development path, the economic partner relations will have a further deepening with the process of FTA, and the complementary nature will be reflected in the evolution model of bilateral trade and investment. Therefore, the building of FTA between China and Australia will not only create important significance to the two countries'future economic development, but also make far-reaching impact on the prosperity and stability of APEC.This paper studies the real foundation and economic effect of China-Australia FTA on the basis of reviewing the free trade theory. In the real foundation part, through the trade in goods, service and investment, analyze the two countries in economic openness, trade status and trade intensity. Concluded, both sides have a high degree of market opening; have occupied an important trade status in the world and regional context and high degree of trade integration between two countries. With the economic strength, the two countries will cooperate gradually closely in the service trade and investment field. However, the wide range of service industry system is not perfect, and Australia's investment in China is relatively narrow. In addition, the article also analyze the comparative advantage and competitive advantage of two countries, finding that the two economies have higher complementary and make inter-industry trade as the main cooperation mode. In the empirical analysis of economic affect part, firstly from the static view, study the trade effects and welfare effects based on general equilibrium analysis. Then through building econometric model, finish the regression analysis on trade creation effects. The results infest there will create different trade effects in the region according to the different imported commodities. At the same time, there will be different influence to the trade volume between two countries because of the tariff abolition. Overall, Australia's import growth scale will be greater than China. Secondly from the dynamic view, through the decomposition of model and formula, find the effects of economic growth, technological innovation, economies of scale and competition. Subsequently, through building the tariff and investment econometric model and regression analysis, get the conclusion that there is reverse relations between the two factors. Finally, based on the above study and the overview of economic effects of China-New Zealand FTA, the paper put forward some countermeasures from varied aspects to promote China-Australia Free Trade Area.China-Australia Free Trade Area has not only a solid foundation in reality, but also plenty of empirical evidence. With the global economic integration process, as well as Australia and China in political, economic, cultural close contact, the negotiation of trade agreements and Australia will be reached as soon as possible. While there are still some differences in economy level and other aspects, some challenge after the FTA building. But so long as the two countries have a positive and cooperative attitude, with the ultimate goal of win-win situation in the region, and promote its development step by step, believe that the realization of China-Australia FTA will played a huge role in the long-term development of both economies and world economy.