Study On The Economic Effects Of Establishing FTA Between China-South Africa

With the gradual development of the regional integration and globalization, the trade relations and investment between countries are being closely. However, the WTO framework appears to meet some problems that it is difficult to reach agreement between countries. So the international regional integration develops rapidly. The establishment of a free trade area has become a main way for many countries to participate in the international cooperation and competition. The European Union, The North American Free Trade Area and Asian Free Trade Area are the successful cases to prove the significant influence of regional economic integration in the pattern of the world and the international trade.China and South Africa are the members of The Bricks, which will provide a favorable environment for the two countries in economic and trade relations. China is the biggest developing country in the world, while South Africa is the most developed country in Africa. Since the establishment of diplomatic relations between the two countries, they have maintained a healthy, good, continuous economic and trade relationship and played an important role in the process of regional integration. The establishment of a free trade area between the two countries will promote the bilateral-trade relations and the negotiation process of China-SACU. For China, the advantages of export are in clothing, shoes and hats, textile, etc., while South Africa has relatively cheap land and mineral resources. If China and South Africa establish a free trade relations, it will help China to establish new free trade area with the other African countries.This paper aims to provide a theoretical basis, methodological reference and policy suggestions for the construction of China-South Africa free trade area. To analyze the competitive and complementary of the export products by using the trade integration, the degree of opening-up, export similarity index, ect. In the aspect of static effect, The model of Balassa analyzes the economic effect of the China-South Africa FTA. In the aspect of dynamic analysis, the establishment of a free trade area of the two countries will produce investment effect, competition promoting effect economic growth effect and scale economy effect. On the basis of the data and the empirical results, the paper gives referenced suggestions.This article first introduces the theory of regional economic integration, then explains the customs union theory, free trade area theory, common market theory, big market theory respectively. These theories provide a theoretical basis for analysis the feasibility and economic effect of the establishment of a free trade area between China and South Africa. In addition, the paper has analyzed the feasibility for the countries to establish the FTA in the aspects of the bilateral trade present situation, trade complementarity analysis and problems for the two countries to establish the FTA. Also, this paper simulates the static and dynamic economic effect of the China-South Africa FTA. Finally, it offers the suggestions for the two countries to establish FTA, such as reducing the balances of trade, cooperation in resources and energy and transferring to investment, ect. which will help the success of the establishment of the FTA.The paper concludes that the two countries export products which have respective advantages via the data and empirical researches. South Africa is rich in minerals and precious metals. China is given priority to labor-intensive products, such as textile, shoes and hats. The openness of the two countries are all quite high is higher and the products of the two countries are more complementary than competitive. These conditions facilitate the establishment of a free trade area between the two countries. After the establishment of the China-South Africa FTA, it will produce net trade creation effect. What’s more, China and South Africa will reach a win-win situation.This paper which refers to previous studies makes the innovation in the following aspects, Firstly the selection of countries is of advanced breakthrough, selecting China and South Africa, the members of the Bricks, as the research objects. Secondly, there are only a few studies on the international trade between China and South Africa, this paper also comprehensively summarizes the bilateral trade after analysis of the economic and trade status. Thirdly, The paper is not only collects many realistic statistics of the two countries’ international business, but also studies through the combination of the theoretical and demonstrable analysis. In the end, the paper provides countermeasures and suggestions for the establishment of China-South Africa FTA.