Research On Trade Effect Of CAFTA

With the booming economic integration, countries in the world have actively engaged in the process of integration. Regional economic integration, as an important part of global economic integration, is increasingly highly valued by other countries. Various countries choose to develop regional economic integration with neighboring countries or regions to realize their own trade development. Economic integration can make one country no longer to endure the fierce international competition alone. One country can better cope with treacherous international economic situation by enlarging economic community. China, as a developing great power, has sought to comply with the international development trade and choose a proper economic integration path for itself, which becoming a concern issue by other countries.CAFTA started roundly in 1th Jan, 2011. Since CAFTA was established, trade quantum on both sides has increased progressively year by year. It is proved that China join in REIO is a wise determination, which has not only complied with the developing trend of world economy, but also benefited its own economic development. The previous research one sided sought the comparison between trade creation and trade diversion effect, but ignored the trade of complementary and competitive relationship with CAFTA and considered that CAFTA will exploit the resources of ASEAN, as well as its trade diversion effect is bigger than creation effect. However, this thesis regards it as a win-win determination to establish CAFTA, which has a extensive development prospects.This thesis takes the method of combing qualitative analysis and quantitative analysis, combing theory and empirical research. It has quite comprehensively discussed CAFTA's trade effect issue after it's founded, and pointed out a direction for developing countries to preferably construct its own economic integration organization. This thesis, combing with CAFTA's established background, construction process and established significance, firstly starts from the perspective of customs union theory, free trade area theory, intra-industry trade theory and developing country's economic integration theory and such international trade theory to analyze probable vast trade creation effect and a handful of trade diversion effect that made by constructing free trade area. And then, it has studied CAFTA's trade effect from the perspective of empirical analysis. Firstly, it has analyzed CAFTA's current situation to obtain that China's exported competitive edged products are based on labor-intensive products and capital-intensive products, while ASEAN's exported competitive edged products are based on resource-intensive products and capital-intensive products. Exported proportion of technology-intensive products on both sides has also risen year by year. Trade between China and ASEAN is complementary and competitive. After that, it has collected previous trade data of China and ASEAN, and applied trade combining index, comparative advantage index, trade complementary index and industry trade index to analyze trade effect within the free trade zone. So it has obtained that there is an inner connection between trade creation and trade diversion of complementary and competitive. Because that China and ASEAN are belonging to developing countries, with the close economic development level and competitive industrial structure, it has limited CAFTA's trade diversion efficiency of space. In the short run, the complimentarily degree between China and ASEAN's trade is the major factor of CAFTA's trade creation efficiency of space. In the long run, competition between China and ASEAN's trade can produce trade creation effect. Finally, according to the conclusion of trade effect of CAFTA, the thesis has analyzed the development tendency of free trade zone and considered that establishing CAFTA can increase trade volume on both sides, express comparative advantage and increase mutual investment. And it has proposed a reasonable proposal to increase trade effect from the perspective of direct trade effect and indirect trade effect.