Free Trade Zone, The Dynamic Comparative Advantage, And A Country's Industrial Development

This article uses the Dynamic Comparative Advantage Theory as the mainanalytical framework. Based on the review of the literature, we discuss themechanism of the industry development, then point out that the Free Trade Agreement(FTA) is an important trade policy to promote the dynamic development ofcomparative advantage, and consider the FTA is conducive to realize industrialupgrade especially in Developing countries.In the part of demonstration, firstly we explain three different mechanisms inwhich the FTA affects the comparative advantage of industry under the theory ofdynamic comparative advantage (Accelerating factor accumulation, promotingtechnological progress and bringing about economies of scale). Then we give ademonstration of the establishment of China－ASEAN Free Trade Area. According tothe calculation of the Revealed Comparative Advantage Index (RCA) and the Markovmatrix of Chinese export products during2002-2010, we find that in the progress offree trade area construction, the changes of Chinese industry comparative advantagereveal that China is undergoing the upgrade of industrial structure.This article has reached the following conclusions on the basis of the theoreticaland empirical analysis: Free Trade Agreement (FTA) is conducive to a country,especially large developing countries to exert the dynamic comparative advantage ofindustry, and achieve the goal of industrial upgrade and development.