The Analysis Of Trade Creation And Trade Transfer Effect Of China ASEAN Free Trade Area

As a complement to the global multilateral trade system,regional economic integration has brought positive impact on the development of the world economy.As the world’s largest developing economy,China’s FTA Strategy started late but developed rapidly in recent years.Since the Asian financial crisis in 1997,China began to actively participate in and promote regional economic cooperation and steadily develop external FTA.Since the Framework Agreement on Comprehensive Economic Cooperation between China and ASEAN has singed,China has concluded 14 free trade agreements with 22 countries and regions in the world up to now.As the first as well as the only one multilateral free trade agreement of China,CAFTA’s economic benefits are becoming increasingly apparent.China and ASEAN are geographically adjacent and the two parts have strong complementarity,closer cooperation of the two sides will undoubtedly promote trade and economic development to a deep degree.The construction process of CAFTA can be divided into three stages:Since 2002 China-ASEAN Comprehensive Economic Cooperation Framework Agreement signed to 2010 China’s 93%trade products from ASEAN achieving zero tariff f is the start of CAFTA and significant reduction of tariff phase;From 2011 to 2015 is the full completion of CAFTA stage,and at this stage a vast majority of trading products among Vietnam,Laos,Myanmar,Cambodia achieve zero tariff,service trade market and capital market open deeply;After 2016 is the consolidation and improvement phase,and the two sides need to work together to promote stability,prosperity and healthy development of CAFTA.Since 2002 CAFTA has established 14 years,so it is very important to make a systematic analysis of trade effects of the world’s third largest regional economic agreement.Most of the existing studies on the Effects of CAFTA uses gravity model as a tool,but there are great differences in the choice of regression methods,FTA virtual variable settings and data analysis.On the basis of previous studies,this paper will make a systematic analysis on the trade creation and transfer effect of CAFTA by selecting appropriate regression and data processing methods.Firstly,this article will sort out some related theory of FTA including customs union theory,free trade zone theory,big market theory,hub-spoke theory and domino theory;Subsequently,this paper will describe current development of CAFTA by using form and graph to analyze the trade development status,such as trade development trend,trade commodity structure between China and ASEAN as a whole as well as some major ASEAN countries.Besides,the paper will also demonstrate some issues relating to the proposition,construction and meaning of CAFTA "upgraded version" in this part;On this basis,the core part of this paper will analyze the trade creation and transfer effect of CAFTA by using gravity model.The model is tested on a sample of 30 countries over the period dating from 1995 to 2014 using countrypair’s aggregate and disaggregated export data for agricultural products,mechanical and electrical products and through the mixed regression,fixed effect regression,random effects regression to explore the trade creation and trade transfer effect of CAFTA.Finally,this paper also points out the existing problems of CAFTA as well as gives some suggestions on how to tap the potentials and push the development of CAFTA to a higher level in new stage.Through analysis,this paper can draw the following conclusions:Firstly,China-ASEAN free trade area leads to substantial and significant trade creation in both whole trade level as well as in agricultural and mechanical and electrical products level;secondly,the significant trade creation effect between CAFTA members is not at the cost of trade transfer between CAFTA members and nonmembers;Moreover,CAFTA also increases trade volume between member countries and nonmember countries outside the region.In conclusion,China ASEAN Free Trade Zone has not only brought positive economic significance for the member countries,but also has positive impact and great importance for the development of world economy.