Study On The Trade Effects Of China-russia-Mongolia FTA

The main purpose of this paper is to study the expected trade effects of the China-Russia-Mongolia FTA.As we have known there are high-level political diplomacy,a long history of trade,complementary trade structure,and important partnership of ‘Belt and Road' among Russia,Mongolia and China.However,the level of trade development is not as well as usual expectations.Academics argue that the various trade barriers and less trade facilitation could be the major obstacle of trade development among the three countries.Setting up the FTA would be the solution to overcome the trade obstacles and tap the trade potentials among the three.Therefore,studying the FTA among Russia,Mongolia,and China has the research value.The willingness of a country to join the FTA depends on the trade and economic benefits after joining.Thus,the analysis of the trade effect of FTA is one of the important parts of analyzing the feasibility of FTA.In 1950 s,Viner proposed the trade creation effect and trade transfer effect of a customs union;Meade develops a analytical framework of trade effect of FTA based on Viner;the study of Viner and Meade becomes the theoretical foundation of the research on partial equilibrium of trade effects in FTA.Various FTAs emerges afterwards,and the composition of the member country is increasingly complex.Especially for the FTA that there are significant differences in the economic size of member countries,i.e.there are more and more FTAs with various economic sizes among member countries,the analyzing of the trade effect is not able to simply employ Viner-Meade framework.One must extend the above framework and incorporates the impact of different products and supply elasticity on the trade effects of FTA with various economic sizes of member countries.Thus,our study is significant both in theory and reality.This dissertation firstly summarizes the theories of FTA,and then sets up the model for analyzing trade effects in the FTA with various economic sizes of member countries,basing on the Viner-Meade model and taking the heterogeneity of economic scale among the member countries-Russia,Mongolia,and China into account.Thirdly,I simulate the trade creation effects,trade transfer effects,and other trade effects when countries with different economic sizes joining into the FTA.In addition,by employing SMART model-a computable partial equilibrium tool empirically examine the trade effects of trade concession in the CRM(China,Russia,Mongolia)FTA.This dissertation then analyzes the welfare after setting up the CRMFTA and attempts to form policy applications for setting up the FTA.The dissertation is arranged by the following 5 chapters:Chapter 1.Introduction.This chapter firstly introduces the research background and significance,and then finds the research topic by summarizing the theoretical and empirical literature on the trade effects of FTA.In the last,this chapter introduce the research ideas,contents,mythology,contributions and limitations in the dissertation.Chapter 2.Theory on trade effects of CRMFTA.This chapter firstly introduces the theory framework on trade effects of free trade area,with the emphasize on the Viner-Meade framework of static trade effects of FTA.Next,basing on Viner-Meade framework and incorporating heterogeneity economic sizes of member countries in the area,the FTA can be divided into two scenarios-“small” and “large” countries;“large” and “large” countries.Thirdly,I analyze the trade effects of countries joining the area from different products and supply elasticity aspects.Chapter 3.Empirical framework of trade effect of CRMFTA.I use SMART as the major analytical tool.Firstly,I introduce the SMART by explaining the principle of SMART analysis on the trade effects of FTA.Secondly,I set up the empirical model for the trade effects of CRMFTA with the limited export supply elasticity hypothesis.Chapter 4.Basing on the empirical study of trade effects of FTA by using the SMART model,I measure the trade effects of CRMFTA by SMART model.I set up two scenarios-partially tariff reduction,and zero tariff in the process of setting up the CRMFTA,and then simulate and measure the trade creation effects,trade transfer effects,trade growth,tariff revenue effects and welfare effects for each country and each industry in the country.Chapter 5.Conclusion and policy implication.This chapter summarizes the above theoretical and empirical analysis and attempts to propose feasible polices contributing to the setting up of CRMFTA.