Research On The Influnce Of The Free Trade Area On The Inner Terms Of Trade

More and more countries have been involved in the process ofregional economic integration. Regional economic integration is carry outfree trade in a certain range.The core purpose of Free trade is to obtaintrade interests,therefore, in the final analysis, the regional economicintegration is also to obtain trade interests.According to the theory oftrade,the terms of trade is the important index measured trade benefits ofa country in the international trade.It is related to the superiority of theimmediate trade benefits of every country.Regional economic integrationhas six kinds of forms.They are Free Trade Area, Customs Union,Common Market, Economic Union and complete EconomicIntegration.At present, most countries have become the participants ofone or more free trade area, and two of three largest regional economicintegrations in the world are free trade areas.So studying the influnce ofthe free trade area on the terms of trade of the member countries will bebeneficial to better participate in the free trade area and get the tradeinterests for the member countries.Under this background,the paper starts from the perspective of thefree trade area and explores how the establishment of the free trade areaaffects the terms of trade of the member countries.In the theoreticalSection, the paper sums up the economic effects of the free trade area，therelated indexes of the terms of trade and their change foundation.According to this and the inner terms of trade effect of theregional economic integration is how a series of effects from theestablishment of the regional economic integration affects the inner termsof trade,the paper explores how a series of effects of the free trade areaaffects the terms of trade of the member countries.Founding that theestablishment of the free trade area affects the import and exportcommodity prices of the member countries through its effects, theninfluences the Net Barter Terms of Trade;It also affects the exportquantity of the member counries,then influences the Income Terms ofTrade;It mainly affects the Labor productivity through the Dynamiceffects,then influnces the Factor Terms of trade.In the demonstrationanalysis, the paper takes the CAFTA as an example with a contrastanalysis method and simple regression method analysis, and found thatthe establishment of CAFTA produced a series of economic effects whichcan affect the prices of import and export commodities,export quantityand the labor productivity.Since the1980’s, the Net Barter Terms ofTrade of our country has continued to deteriorate,the Income Terms ofTrade and the Factor Terms of trade have improved.This has a certainrelationship with China’s participation in the establishment of the CAFTA.China can get profit from participating in the establishment ofCAFTA,but the distribution of interests between both sides isimbalanced.The last is the thought and enlightenment after analyzing for China how to participate in the free trade area and improve the regionaleconomic cooperation strategy.