The Study On The Economic Effects And Prospects Of China-Japan-Korea Free Trade Area’ Establishment

Regional Economic Integration has been the main tendency of world economic development and also the main characteristic of this society. The establishment of EU and NAFTA means that regional cooperation is popular worldwide. Nowadays, we can see that EU and NAFTA stimulate the economic development of their member. In this case, as the world big3plates, East Asia must strength the regional cooperation to keep the position in the world. Among East Asia, China, South Korea and Japan are the three most economically powerful countries, if there is a FTA among them, on one hand, its establishment will drive and accelerate the process of regional economic integration in east Asia, on the other hand also can accelerate the economic development of China, South Korea and Japan, even all countries in east Asia. China-Japan-Korea Free Trade Area (CJKFTA) is greatly conductive to East Asia Regional Cooperation.Based on the theory of free trade area theory, this paper uses empirical analysis method to analyze the economic effect of CJKFTA. We also.analyze the realistic foundation of CJKFTA, barriers of the foundation and also give some suggestions and strategies for the establishment of CJKFTA. This paper includes seven chapters.Chapter one is the openness of this paper. It introduces research background, research objective, overseas and domestic research status, research train of thoughts and its weak points and possible theory innovations etc.Chapter Two is the theoretical basis of CJKFTA. The theories include the Customs Union Theory and Free Trade Area Theory.Chapter three analyzes the basis of the establishment of CJKFTA from different angles. Respectively from these three countries position in the world, their economic openness and intra-industry trade index etc. We make use of some empirical methods such as RCA index, TC index and GL index and deal with a large amount of primitive trade data in1992-2011with them. We found that there is a very strong complementarity in economics among China, Japan and South Korea, in which Japan is a developed country with outstanding advantage in capital and technology, South Korea is an new industrialized economy with a certain of advantage in labor and market. They are dependent on each other in economic development.Chapter four is the core part of this paper. First, we made use of gravitation model to predict potential trade between China, South Korea and Japan. Secondly, we estimate trade effect of CJKFTA through constructing model, including static effect and dynamic effect. The static effect includes trade creation and trade diversion. And the dynamic effect includes scale economic effect, competition effect and stimulates investment effect. As a result, China got the most static effects from the CJKFTA if it is established.Chapter five discussed existing difficulties and obstacles of the establishment of CJKFTA because of some economic and non-economic reasons.Chapter six discussed the policy choice to overcome the existing difficulties and obstacles of the establishment of CJKFTA. We consider that it is very important to give full play to the role of engine of the economic growth of China. We must also give play to the role of government, improve the level of industry. The leaders of every country must negotiate with each other to build up CJKFTA etc.Finally, we consider the tentative and prospects of the setup CJKFAT. We must note that there are some difficulties and obstacles to the establishment of CJKFTA because of some economic and non-economic reasons. China, Japan and South Korea should seek common point while reserving difference in promoting the regional economic cooperation, and finally win through in the wave of globalization and regional integration.