The Empirical Analyses On China-EU Trade Costs And Their Impacts

In traditional trade theories, which are built under the assumption of trade liberalization, trade barriers were almost excluded because they did not change traditional trade pattern. However, with the development of international trade and the improvement of trade theories, trade cost is treated as "a golden key to solve all other puzzles in open economy macroeconomics", and it starts to play a significant role in international specialization and trade models. Besides, enterprise location selection and economic behaviors can be well explained when considering trade costs. Although trade barriers based on distance are dramatic reduced because of technology progress especially in transportation and communication, trade costs are still wildly exist and perplex bilateral trade today.Benefitting from foreign trade growth, China experienced huge economic prosperity for more than thirty years. As China’s largest trading partner and import market, the European Union is an important source of capital and technology for China. At present, facing the remodeling of world economy, enhancing business cooperation between China and EU does serve the interest of both sides and is a strong urge for them to joining hands tackling the challenge of international finance crisis and realizing the common development. Therefore, it has theoretical and realistic importance to promote sound and sustained development of China-EU trade by estimating bilateral trade barriers and analyzing the impetus of bilateral trade growth comprehensively and deeply.Theoretical researches always lay particular emphasis on supply and demand to explain bilateral trade growth, while the contribution of declining trade barriers is nearly ignored. This paper uses improved gravity model, which overcomes shortcomings in traditional methods, to estimate China-EU trade costs from 1995 to 2012, and analyzes the change trend of different kinds of trade barriers. Furthermore, study major factors affecting trade costs between China and EU with empirical approaches. In addition, decompose the growth of China-EU trade into four parts to explore their contributions, and find out the driving force behind the trade growth, In the end, summarize the main points and put forward specific and reasonable policy suggestions.