Impact Of Regional Trade Agreements On Global Value Chains

With the development of production technology and information communication technology as well as the decrease of trade cost in tariff,traffic and so on,international division of labor has changed from inter-industry specialization and intra-industry specialization to intra-product specialization.In order to minimize costs,multinational enterprises decentralize their production stages and locate them all around the world.Traditional trade pattern was that a country produced the commodity and sold it all around,but now it has changed and the new trade pattern is that several countries produce the commodity together and it is sold all around.Since the products have crossed borders several times,aggregate statistics can not show the economies' actual production activities properly,while global value chains statistics are more reliable and useful,which are calculated based on input output tables.Therefore,doing the research from the perspective of global value chains can reflect the actual situations.When the international trade pattern has changed deeply,regional economic integration has developed quickly in recent 30 years.Not only has the number of reached regional trade agreements increased fast,but also trade agreements have covered more and more issues.When the international economic rules are reestablishing,economies have actively participated in regional economic cooperation,in order to get more discourse power and become influential.They want to take advantage of regional economic integration,in order to expand the influence of their preferred international economic rules and make them developed from regional rules to international ones.Especially when the framework of multilateral cooperation is developing slowly,the significance and effectiveness of regional economic integration has become more obvious.In order to promote domestic reforms and expand openness,China has put forward to accelerating the free trade areas strategy and building up highstandard free trade areas network.Therefore,it has practical significance to study the impact of free trade agreements on China.In order to truly reflect the influence of free trade agreements that China has signed,this thesis uses global value chains statistics to analysis the global value chains effect of Chinese free trade agreements.The thesis is divided into seven chapters,analyzing the impact of signed regional trade agreements on the value chain relationship among China and its trading partners.The first chapter contains the background,significance,research contents and methodology,characters and innovations,illustrating the idea and the reason why I choose to make a research on the impact of regional trade agreements on global value chains.The second chapter is literature review,containing important articles about regional trade agreements and global value chains,in order to establish foundation for research on influence mechanism,development situation from the perspective of GVC,and the empirical study on the global value chains effect of regional trade agreements.The third chapter analyzes the current development situation of free trade agreements from the perspective of world and China and then makes a comparison among Chine,European Union and United States.The fourth chapter analyzes the economic development situation from the perspective of global value chains,including illustrating production activities and value chain activities from the perspective of world and China as well as the change tendency,and then makes a comparison among typical economies,in order to have some knowledge about the reality and lay the foundation for further research.The fifth chapter presents theoretical analysis of global value chains' influence factors and the effects of regional trade agreements.The article has integrated a systematic framework of global value chains' influence factors and a framework about influence channels of regional trade agreements' effect.They are combined together and form the theoretical analysis of regional trade agreements' impact on global value chains.Based on the above research,the sixth chapter use fix effect model to make the empirical analysis of the global value chains effect of China's signed regional trade agreements.In order to solve the endogenous problem,the empirical model has included several fixed terms.After make a conclusion of development situations,theoretical analysis and the empirical study,the seventh chapter gives policy suggestion on China's accelerating the free trade areas strategy and also analyzes the shortage of this thesis,pointing out the unsolved problems and future research idears.The main conclusions of this thesis are listed as follows.First,regional trade agreements are mainly distributed over East Asia as well as Europe region,and the rules that they contain have expanded from border measures to beyond border measures.Since 1990,economic integration and regional trade agreements have developed quickly.World trade organization's regional trade agreement statistics have shown that regional trade agreements are mainly distributed over East Asia as well as Europe,and the regional economic integration in East Asia is developed most quickly than other regions.The issues covered by trade agreements have expanded from border measures to beyond border measures.For example,chapters about environment,labor,sustainable development,competition,anticorruption and so on are included more often.Trade agreements gradually become more high-standard and include more issues.Second,economies show different charaters in developing regional trade agreements.China now pays much more attention to developing regional trade agreements,requires to establish high-standard agreements and upgrade existing agreements.European Union,the highest developed regional economic integration,not only focuses on economic intra-integration,but also tries actively to reach economic cooperation with non-EU economies,getting economic and non-economic benefits as well as expanding the coverage area of EU economic cooperation network.With the development of international economic environment,the United States,one of the three global production centers,has paid more attention to the economic benefit of regional trade agreements,and has changed its trade policy priority from multilateralism and regionalism to bilateralism.The negotiation principles of Trump government are fairness,reciprocity and reciprocal opening.By withdrawing Trans-Pacific Partnership and renegotiation exsiting trade agreements,Trump wants to pursue the interests of America first.Third,global production activities and China's production activities are mainly performed to satisfy pure domestic demands,and their average production length show rising tendency.What's more,China participates more in relatively downstream production activities.The decomposed production activities statistics,global value chains participation index and production length show that global production activities are mainly performed to satisfy pure domestic demands and the rest activities can be divided into simple global value chains activities,traditional international trade and complex global value chains activities.China's production activities are also mainly perform to satisfy pure domestic demands,and during 2007-2017,the value added of activities satisfying pure domestic demand to gross domestic production ratio is gradually increasing,which is due to China's economic structure reform as well as industry upgrading and now,domestic demand has become the driving power of China's economy.China has higher backward participation index than forward participation index,which reflects that China participates more in relatively downstream production activities.There are rising tendency in global average production length and China's average production length,which shows that productions are more specialized and there are more production stages in world's and China's production division.Fourth,regional trade agreements have impact on trade,investment,resources distribution and usage,economic growth and rules.With these impacts and specific provisions,regional trade agreements can influence production advantages and trade costs,and then change economies' global value chains situation.Although international production division is fragmented and becomes intra-product division,it also follows traditional international trade theory.It is relative advantages that decide economies' production situation in the value chains.Relative advantages mainly come from production advantages and trade costs,which will influence global value chains.Relative advantages of production are mainly influenced by production technology,labor,capital,natural resources and so on.Factors that have an impact on trade costs are information communication technology,transportation,tariff,non-tariff obstacles,institution,geography,language,culture and so on.Moreover,since the products usually cross borders several times,the influence of trade costs is easy to be amplified and has accumulative effect.Regional trade agreements have many effects and they can be divided into impacts on trade,investment,resources distribution and usage,economic growth and rules.Through these channels and agreements' text,trade agreements can influence relative advantages of production and trade costs,and their changes will further have an impact on global value chains situation.Therefore,theoretically,regional trade agreements can influence relating parties' value chains relationship.Fifth,the regional trade agreements that China has signed with its partners can have an impact on their value chains relationship,enhancing their production limkage.The thesis uses global value chains participation index and production length to do the empirical study.In order to analyze further,production activities are divided into simple global value chains activities and complex global value chains activities,and economies are divided into developing economies and developed economies,which are regressed separately.The empirical study of global value chains participation index covers 56 economies and the time range is from 2007 to 2017.The empirical study of production length also covers 56 economies and the time range is from 2010 to 2017.Control variables are economic scale,education,research and development,logistics and institution.The regression results show that regional trade agreements do increase trading partners and China's forward participation index as well as China and trading partners' backward participation index.When trading partners are developed economies or developing economies,regional trade agreements have different impact.Regional trade agreements have similar impact on simple global value chains activities and complex cross border activities.Moreover,regional trade agreements can obviously increase the production length between China and its partners,especially when the trading partners are developed economies.There are three kinds of innovation in this thesis.First,the essay conbines global value chains and regional trade agreements together,and the analysis of regional trade agreements' effect is based on global value chains index,which is a relatively innovative research perspective and content.Second,the thesis has systematically integrated factors which influence global value chains and develop a framework that contains this main factors and their effects.Third,the research object is China rather than the world,and the thesis focuses on the global value chains effect of China's signed trade agreements,expanding existing study.