Empirical Analysis Of Chinese Trade Effect Of CAFTA Framework

As the rapid economic development, globalization has become a trend of theeconomic development. In order to promote good and fast economic development,China is actively into the development of the globalization process. In2002, Chinaand ASEAN signed "the framework agreement on comprehensive economiccooperation between China and ASEAN ", officially launched the construction of theChina-ASEAN free trade area. In2010, CAFTA is successfully completed and Chinahas no tariffs with ASEAN six on most products. In2015, the tariffs between Chinaand ASEAN’s new members will be reduced to zero. From the starting of CAFTA, theeconomic and trade contact between China and ASEAN has become increasinglyfrequent, bilateral trade volume has also increased a large number, both sides haveachieved good development, which actively promoted the development of free tradearea. At present, China has become the ASEAN’s largest trading partner, and alsoASEAN has become China’s third largest trading partner. These significantachievements depend on the development of the construction of free trade area, andthe rapid development of both sides’ economy also promotes the continuousdevelopment of the free trade area.However, China and ASEAN are similar in the resource endowment, humanresource and the economic structure, which leads to a rat race between the both sidesin terms of trade. In addition, due to the wide deference of economic developmentbetween ASEAN countries, some countries are inevitably affected to some extentafter the establishing of CAFTA, so they will certainly take self-protection measures,which hindered the development of free trade on both sides. And in the developingand constructing of the CAFTA, the corresponding institutional construction andpolicy implementation did not reach the designated position. These difficulties willbring a certain loss in the economic development of both sides. So, after theconstruction of the China-ASEAN free trade area, the trade effects and net benefits of China is an issue worthy of analysis and research, which is vital for China in thedevelopment of free trade area.First of all, this paper analyzes the Trade Creation Effect which can increase thesocial net welfare and the Trade Diversion Effect which can reduce the social netwelfare through the theories of customs union, free trade area and so on. Besides, thispaper analyzes the Trade Creation Effect through the share of Chinese exports toASEAN in Chinese total export volume, which finds that the proportion of Chineseexports to ASEAN has increased steadily and that generated a certain Trade CreationEffect. And also the paper analyzes the outside and inside Trade Diversion Effectthrough the share of Chinese imports from ASEAN in China’s total imports and theshare of Chinese imports from every countries of ASEAN in Chinese total importsfrom ASEAN. Which show that China has also created a certain extent TradeDiversion Effect.Secondly, this paper selects the data from China, ASEAN countries and China’simportant trade partners, and establishes the panel data from2003to2012.It carrieson an empirical analysis on China’s Trade Creation Effect and Trade Diversion Effectby using the econometric model. Results show that China generates Trade CreationEffect and Trade Diversion Effect. The trade creation is more than trade diversionthrough measurement, which produces a positive net benefit. This result suggests thatthe construction of CAFTA contributes to the increase of China’s social welfare.Finally, this article summarizes and analyzes the problems in the developing andconstructing process of CAFTA in these years. This paper proposes the correspondingcountermeasures and suggestions: Speed up the industrial adjustment to enhance thetrade complementation between China and ASEAN. Encourage enterprises to seizethe opportunity to go to the world. Promote the non-tariff barriers cutting betweenChina and AESAN vigorously. Perfect the dispute settlement mechanism of CAFTA.Do a good job of system operation docking and expand the influence of free tradearea continuously.