Study On The Economic Effects Of Building FTA Between China And The European Union

Considering the development of the world economy, both economic globalization and regional economic integration are important trends. But with the condition of the after math of global economic crisis and the weakness in economic growth, the "Doha Round negotiations" under the auspices of the WTO is stagnated. The implementation of multilateral trade system is under certain difficulties. This situation makes countries more committed to participate in the bilateral FTA. All kinds of regional economic cooperation organizations globally are rapidly developed. Regional economic integration is becoming an important feature of global economy currently. In addition, the TPP and the TTIP led by US put China in a more severe and more complicated external environment. Based on this fact, China has also speeded up its own-led FTA negotiations, relied on its own economic strength to make the ideas of free trade zones expanded to European countries. With the benefit of establish of China-EU FTA to get rid of the current passive situation.As the world's largest developing country, China has a mature condition to develop FTA. China-EU economic and trade relations are one of the most dynamic trade relationships in the world. China is the EU's second largest trading partner, and EU has been China's largest trading partner for last ten years. It has a very important strategic significance for the development of economic and trade for both China and EU. China and EU are officially launched negotiations on a bilateral investment in November 2013, laid an important foundation for bilateral free trade agreements. The attention of China-EU FTA is also heating up. The signing of the FTA between China and EU has a significant meaning in both economic and social development. China should take this opportunity to actively explore the establishment of China-EU FTA with the largest trading partner to deepen free trade in order to gain a more significant development.On the basis of the above observations and backgrounds, this piece of paper uses the theory of international economics, econometrics and international trade to systematic analysis of possibility of the establishment of bilateral free trade. Usethe economic effects of China-EU FTA as the object, make quantitative and qualitative analysis, and then make suggestions.The article introduces the relevant theory firstly, for analyzing the feasibility of China and EU's trade and economic effects of further research laid the theoretical foundation. Subsequently, the article analyzes the possibility of the establishment of a free trade area between China and EU. Calculate the Central European products revealed comparative advantage index, index of economic openness and index of trade combined degree. With help of the calculation results, the bilateral trade and economic status quo, and the potential for trade between the two sides can be calculated. Meanwhile, the article also analyzes the challenges of the establishment of FTA. Then, the article uses the partial equilibrium analysis method to research the economic effects of FTA. With the build of model to estimate the trade creation and trade diversion effect, and research the dynamic economic effects at the theoretical level. Finally, the article proposes the establishment of China-EU FTA in the process of suggestions from the standpoint of China to seek common ground and win-win situation.On the basis of past academic achievements, this paper implements the innovations in the following areas:First, the article has a cutting-edge topic. The two sides has just started a joint feasibility study on a bilateral FTA in November 2013, and researches related to the establishment of a free trade area between China and EU is also very less, the topic of this article will make up this gap. Second, the article analyzes the economic effects of the FTA from multiple perspectives. Most of the domestic scholars analyzed the economic effects of the FTA stayed only on the basis of theoretical analysis. This articles not only on a theoretical level, but also use simulation programs to calculate both static effects of FTA trade creation and trade diversion effect. Third, in the course of the study we can gradually discover the problems and challenges in building a free trade zone. Through in-depth analysis, propose appropriate measures to promote bilateral FTA construction and to achieve win-win situations.