International Comparative Analysis Of The Trade Creation And Trade Diversion Effects Of The Free Trade Area

The world’s economic development experience shows that the development of a free trade area would promote changes in economic growth and welfare of the member states. The signing of Free Trade Agreement brought its member states significant growth effects, while also exerted varying degrees of negative effects on the non-member state as well as the member states. The original study mainly based on the analysis of one certain Free Trade Area (FTA), researched on the trade creation and trade diversion effects that a single FTA brings. Therefore, this paper, taking three different research objectives, namely "North-North" FTA represented by European Union, "North-South" FTA represented by NAFTA and "South-South" FTA represented by China-ASEAN FTA, comparatively analyzes the influences of FTA to both member nations and non-member nationsThe three types FTA’s 1986-2012 import and export trade data was regarded as research subjects in the situation analysis, analyzed the influences of FTA to both member nations and non-member nations from four aspects-the overall trade size, internal trade structure, external trade structure and the major trade commodity structure, by adding a dummy variable in the gravity model approach in the empirical part, the size of the trade creation and the trade diversion effect has been estimated.Status and empirical results show:the intra-regional trade proportion of China-ASEAN FTA is less than NAFTA, further less than EU, means that China-ASEAN FTA is still in the lower level of regional economic integration; trade creation effect of EU, whose member states enjoy higher levels of economic development, is the largest while the largest trade diversion effect happens in the "South-South" type represented by China-ASEAN FTA. At the same time, the establishment of FTA can promote the commodity structure upgrading and bring benefits to the countries which have higher level of tariff, more trade barriers and week trade foundations.Finally, based on the study results, author puts forward a series relevant policy recommendations, believes show that the future of China and other countries signed a free trade agreement in the choice of trading partners should consider the following three points:Positive sign a free trade agreement with the higher level of economic development of the national, Actively carry out trade cooperation within the industry in order to avoid trade diversion to the member and non-member countries for bring the risk of loss, Actively seek the original relatively high tariff levels, the higher level of trade barriers countries to sign a free trade agreement.