A Study On The Trade Effects Of The China-Japan-Korea Free Trade Zone

In recent years, the little progress of WTO Doha Round negotiations has delayed the development of economic globalization. In stark contrast, the development of regional economic integration has just been unfolded, has set off a new round of development climax in the global scope and has showed some new trends, becoming an important feature of today’s world economic development and the new driving force of economic globalization. However, compared with Europe and North America, regional economic cooperation in East Asia is still lagging behind, especially in Northeast Asia where economy is dominated by China, Japan and South Korea. By now, it has become the slowest region of the development of the regional economic integration and not yet established a unified and institutionalized regional economic organization. Therefore, in this context, the establishment of the Sino-Japan-Korea Free Trade Area has carried not only realistic economic significance but also great strategic importance.The research object of this paper is the trade effect of the establishment of the Sino-Japan-Korea Free Trade Area. The main issues to be addressed are just as follows:First, whether China, Japan and South Korea have the economic base to establish FTA successfully? Second, what have been the respectively comparative and competitive advantages of China, Japan and South Korea in recent years? Third, how can we make theoretical analysis on the trade effect of the Sino-Japan-Korea Free Trade Area? Fourthly, how the regional trade potential will be after the establishment of the Sino-Japan-Korea Free Trade Area and the effect to the economy of these three countries? Fifthly, what are the constraints in promoting FTA negotiations and what kind of policy China should take in the construction of the Sino-Japan-Korea FTA in the future?On the basis of the theoretical framework and the economic base of the research of the Sino-Japan-Korea FTA, this paper does the empirical research on the trade effect of the Sino-Japan-Korea Free Trade Area. This article is divided into seven parts:The first chapter is an introduction, describing the research background, the main ideas and research methods, and describing the structure, innovation and shortcomings of the article. The second chapter is the theoretical basis for the trade effect of international regional economic integration, mainly reviewing the literature of the trade effect of international regional economic integration and that of the Sino-Japan-Korea Free Trade Area, and inducing and combing the related theories of international regional economic integration.The third chapter discusses the economic basis of the establishment of the Sino-Japan-Korea Free Trade Area, mainly analyzing the importance of foreign trade to the economic development of China, Japan and South Korea, changes in trade patterns in China, Japan and South Korea, competition and complementary of trade structure and mutual investment.The fourth chapter analyzes the changes of and measures comparative and competitive advantages of the trade in China, Japan and South Korea by utilizing Revealed Comparative Advantage Index (RCA), Trade Competitive Index (TC), and relevant data. In addition, measuring intra-industry trade level of China, Japan and South Korea by using the relevant index so that fully summarizes the basic situation and trend of the current trade structure of these three countries.The fifth chapter is mainly to make the theoretical analysis of the trade effect of the Sino-Japan-Korea Free Trade Area. First, this part analyzes the formation mechanism of the Sino-Japan-Korea Free Trade Area. Second, this part theoretically discusses trade creation effect and trade diversion effect from the perspective of the tariff concessions, comparative advantage. Finally, this part pays great attention to the analysis on long-term effect of the Sino-Japan-Korea Free Trade Area.The sixth chapter is mainly to make empirical analysis on the trade effect of the establishment of the Sino-Japan-Korea Free Trade Area by using the gravity model and GTAP model. First, this part analyzes the regional trade potential of the Sino-Japan-Korea Free Trade Area by using the gravity model. Then this part analyzes the changes of the trade scale, terms of trade, trade structure, production structure, economic growth and benefit level over the benchmark plan after the establishment of the Sino-Japan-Korea Free Trade Area by using GTAP model, and then analyzes the effects of welfare of the Sino-Japan-Korea Free Trade Area to other countries, regions and the world.Chapter VII focuses on the main conclusion and policy recommendations of the paper. Firstly, the part analyzes the different constraints in promoting the negotiation process of the Sino-Japan-Korea Free Trade Area and discusses the realization path and strategy from the perspective of economy, policy and exterior study, etc. Secondly, on the basis of the theoretical and empirical research, this part concludes the main ideas and proposes that China should utilize comparative advantages and expand the exports growth; develop intra-industry trade and speed up the adjustment of industry structure; further attract and expand South Korea and Japan’s direct investment to China, encourage Chinese enterprises to "Going Out"; strengthen communication and consultation, actively promote the establishment of an effective dispute settlement mechanism; adopt a flexible strategy and follow the principle of "Easy-To-Difficult, Step-By-Step" to promote the establishment of the Sino-Japan-Korea Free Trade Area steadily.