The Analysis Of Economic Effects Of China-Canada Free Trade Area

Nowadays, the economic corporation is indispensible for development amongcountries, and the economic dependence is higher and higher than ever before. It isimpossible for any country that they can develop alone without other countries. FreeTrade Area is the main form for international economic development. China hasalready established FTA with different countries and cooperated closely with them,which has made great contributions for economic development. However, there arestill little developed countries establishing FTA with China, so it is beneficial forChina to strengthen the relationships with developed countries, especially thecountries who own rich natural resources. Canada, as the developed country with richnatural resources and energy, is the ideal cooperation partner for China. The leaders ofChina and Canada also expressed their firm intention about cooperation between twocountries in several international meetings between2011and2012. The feasibilityreport has been completed.In the background of this political fact and in the basis of academic empiricalstudy, this thesis made discuss and study for economic effects and some other relatedissues provided that the FTA between China and Canada is established. The tradegravity model and Balassa model are chose for the tools of qualitative analysis.Through the research of the export and import amount between China and Canada,both quantitative analysis and qualitative analysis are used to analyze the trade effectand investment effect, which are the main effects for economic effect for academicstudy. Besides, the welfare effect is analyzed as well. At last, the thesis predicts somethorny issues that will make serious trade imbalance about income and provides somemeasures to prevent terrible results.The paper was divided into six chapters and the main contents are summarized asfollows:The first chapter briefly introduces the background, purpose, and the content and methods of this thesis. The FTA economic effects, static and dynamic effect aresystematically reviewed by summarizing domestic and foreign references. Theresearch thought, frame and entry point are presented as well.The second chapter is the theoretical basis of this article. Firstly, the backgroundof FTA between China and Canada is explained and analyze the economic andnon-economic factors to influence the FTA establishment. Trough the analysis andresearch for the current condition of China and Canada, the factual basis andadvantages of establishing FTA are put forward. the feasibility is demonstrated.The third chapter is the focus of this article. The empirical analysis of trade effectbetween China and Canada is presented. The article also uses trade gravity model andBalassa model. The number of export and import between China and Canada during2000and2010is used to be the model regression and gets the ideal results. After theFTA establishes, it can increase the welfare effect. At the same time, this articleanalyzes the influential factors of trade effect and the welfare effect brought by tradeeffect.The fourth analyzed the investment effect of Sino-Canada FTA. At beginning,the article analyzes the factors which influence the FDI of multinational companies,including monopoly advantage theory, internalization theory, and location advantagetheory. Furthermore, the investment effect is divided into investment creation effectand investment transfer effect. Trough the empirical analysis the investment creationeffect and investment transfer effect inside and outside FTA, this article summarizethe main roles impacting the investment effect and the welfare effect produced byinvestment effect.The fifth points out the challenges in terms of establishing FTA between Chinaand Canada and put forward the strategy about how to deal with such issues. Chinaand Canada may face with the balance between long-term benefit and short-termcontradictions. Besides, the inside and outside economic zones and the impact ofAmerica are also the potential threat for FTA. Therefore, It would be wise-advised forChina to deal with the relationship with Canada which are related to competition andcomplementary. Apart from it, promoting the domestic industrial structure adjustment actively is another constructive measure.