China, Japan And South Korea Free Trade Area Build Research

Among the free trade areas China is studying and negotiating, C-J-K free trade area isthe largest one, and with its total economy only less than that of the European Union andNAFTA, C-J-K free trade area will likely become the world’s third largest economic bloc.China’s active participation in the building of C-J-K free trade area is to promote China’sFTA building process according to “the People’s Republic of China’s12th Five-Year Plan”.In the fourth C-J-K Leaders’ Meeting, Chinese Premier Wen Jiabao advocated finishing thegovernment-industry-academia joint study within the year2011and taking efforts to startthe negotiation as early as possible.This thesis starts with C-J-K trade and investment situation, tariff rates and their FTAstrategies, and then studies the industrial division relation of the three parties by calculatingthe comparative advantage and the related intra-industry trade indices of the three partiesin the last three years.And on this basis, it analyzes the expected economic effects,including trade effect, welfare effect and investment effect. According to the results ofabove analysis, this thesis then studies the C-J-K free trade area institution building,utilizing the free trade agreements signed by Japan and Korea with ASEAN respectively.The respective weak industries of the three parties may be hurt due to loss of tariffprotection, which is the main concern of the three parties. The study results show that inthe recent three years, the comparative advantages of the three parties are complementarygenerally. In particular, China and South Korea even show some competitiveness in thecapital and technology intensive industry. Further through the fine set of tariff reductioninstitution, economic and technical cooperation, rules of origin and investment rules, thethree parties could create a free trade area which meets the overall interests of the threeparties, and the “win-win-win” situation may well appear.