Empirical Analysis On Ten Plus Three Regional Economic Cooperation

Some literatures analyze the impact of RIAs on the trade and welfare of member countries, nonmember countries, and the world either by using a partial equilibrium model (see Viner) or by a general equilibrium model (see Meade, kemp-Wan, Macmillan and Mccann).Based on Viner's concept of "trade creation"and "trade diversion", Kindleberger put forword "investment creation"and "investment diversion"to analyze the static effect of FDI in regional integration. The dynamic effect model was founded by Kazuhiko Oyamada on the basis of Ramsey-Cass-Koopmans's optimal growth theory. These theories, in view of trade-investment effect, provide a theoretical framework for the empirical analysis of Ten Plus Three regional economic cooperation. Ten Plus Three regional cooperation may be considered as a cooperative game in view of game theory with complementarity of its member countries as precondition, and with mutual benefit and an effective negotiation mechanism as necessary and sufficient conditions respectively. The outcome is to reach a perfect equilibrium state in the area. Cooperation game theory of regional integration provides a new analytic prospect for the study on complementarity and mutual benefits in Ten Plus Three regional economic cooperation. The trade and investment relationship between Ten Plus Three countries has a good foundation for the economic cooperation and trade liberalization. Japan and Korea prosperous investment in China and ASEAN contribute a lot to regional development, which in turn is in favor of the reasonable resources reallocation and industrial division system. The Ten Plus Three countries are near in geography and many people even live cross borders. They share important resources and have become main trade partners. Their comparative advantages in industry boom the market demand and provide big room and also the precondition for cooperation. Due to different natural conditions, development level and economic style, Ten Plus Three countries have strong complementarity in many economic aspects, such as capital, technology, trade, energy sources, fishery, tourism and traffic etc. For instance, as a highly developed country, Japan is not only the main supplier for both the capital and technology, but also an important demander for foodstuff, primary goods and raw materials. Singapore and Korea have become main provider for electric commodities and capital. China is a tremendous potential market with plenty of natural and human resources, meanwhile it export some high-tech capital intensive and technology intensive products to the developing countries in Asia. ASEAN has already attract much foreign capital because of rich resources and supply a mass of cheap energy and raw materials. This kind of complementarity denotes the huge potential and power in promoting comprehensive and consanguineous economic cooperation in the area. The obvious comparative advantage and competitive advantage of Asian trade commodities along with Japan and Korea's industrial comparative advantage over investment in China and ASEAN form the basis of the complementarity, thus constitute the precondition of economic cooperation in Ten Plus Three. Gravity model is used to discuss the mutual relationship among Asian countries and the results are as follows: the member countries have close trade relations and significant integration effect. A good trade environment, especially institutional arrangement for international trade can eliminate inner trade barriers and increase the trade volume inside the area, thereby advancing the integration. The analysis on static trade creation effect reaches a similar conclusion, that is, trade liberalization in Ten Plus Three increases the welfare of its member countries, sequentially improving the situation in the whole area. The main contribution of free trade area is in the following perspectives. Firstly, tariff reduction and elimination enhances the export opportunities of member countries, in particular for the complementary commodities owing obvious comparative advantages. Secondly, the elimination of none tariff barriers reduces the trade cost and improves trade efficiency, thereby promotes the trade process and GDP growth in the countries and enhances their welfare. Thirdly, it provides a better environment for investment that yields higher percentages of the so called "investment creation"and "investment diversion"effect in Kindleberger (1966). Fourthly, the depressed trade barriers would lead to effectively greater market scale, intensively utilization of similar factors and enlarged production scale, therefore 'economic scale"is in effect. Last but not least, the inner market shall face more furious competition, alleviative oligarchical monopoly and inner market subsection, which result in compulsive adjustment of economic efficiency and competitive advantages. The above mentioned mutual benefits are the necessary conditions of economic cooperation in Ten Plus Three.While the sufficient condition is that participators shall come to an agreement through effective negotiation and engage themselves to the concen their benefit distribution and other economic actions. Ten Plus Three mechanism and various ministerial meetings and high government official meetings form the effective negotiation mechanism and provide a flat roof for mutual communication. Note that the economic and social development is severely unbalanced. Member countries have totally different political and legal system, six-to-one situation, similar but unhomogeneous culture. Besides, untrust and enmity relationships among China , Japan and America,and so on, may have negative impact on the cooperation. Moreover, the similar industrial and trade commodity structures causing serious competition in China and ASEAN, and Japan's excessive protectionism to its domestic market hinder the progress of cooperation. However, the trade and investment developments inside the area should weaken the conflicts. China and ASEAN take the comparative advantages to develop intra-industry trade, step up the industrial structure adjustment and form a reasonable industrial division system to avoid the excessive competition. The trend of global regional integration, establishment of China-ASEAN free trade area and Japan-ASEAN free trade area along with bilateral free trade agreement would boost the progress of trade liberalization in Ten Plus Three. Japan would gradually open its agriculture products market try to avoid to become a fringe group, and do something for the free trade area. The member countries in Ten Plus Three should seek common points while reserving difference in promoting the regional economic cooperation, and finally benefit from the globalization and regional integration.