Study On Economic Effect Of China-Pakistan Free Trade Agreement (FTA) Under The Background Of "China-Pakistan Economic Corridor"

The "two wheels" driving the global economic development are the multilateral trading system represented by the WTO and the regional trading arrangements represented by the free trade area.Since the beginning of the new century,the development process of the multilateral trading system has been blocked,the Free Trade Agreement(FTA),which has a higher level of openness and greater flexibility,has flourished.The signing in November 2006 of the China-Pakistan Free Trade Agreement,which entered into force on July 1,2007,is the third free trade agreement signed by China to the outside world.It is also the first free trade agreement signed by China in South Asia.Object Before that,in the process of economic globalization and the sustained warming of China’s "Belt and Road Initiative" initiative,Pakistan continued to perform poorly in the field of trade.Chronic economic problems,such as the trade deficit,have not been eased for so long that Pakistani officials have shelved the second phase of negotiations in the China-Pakistan Free Trade Agreement,calling for a revision of the terms of the signed agreement.Based on the theories of regional economic integration,customs union and Free Trade Agreement,this paper constructs the theoretical analysis framework of economic effects of Free Trade Agreement based on the multi-dimensional analysis and explanation of economic effects from the above theories.Secondly,by combing the development stage,current situation and influencing factors of China-Pakistan Free Trade Agreement,the economic effect of China-Pakistan Free Trade Agreement is empirically analyzed by using local equilibrium model and general equilibrium model.Finally,aiming at the dilemma of China-Pakistan Free Trade Agreement,the strategy choice of upgrading Free Trade Agreement is put forward.Specifically,this paper mainly draws the following five conclusions:Firstly,the theoretical framework of asymmetric Free Trade Agreement economic effect is constructed,which includes four hypotheses: economic scale,industrialization level,trade barrier and factor endowment.Whether the asymmetric free trade area such as China and Pakistan can gain from the establishment of the Free Trade Agreement can not be measured simply by the income obtained from thestandard Free Trade Agreement.Secondly,the comparative advantage index(RCA)and the competitive advantage index(TC)are used to analyze the industrial competitiveness of China and Pakistan,and it is found that the agricultural products and labor-intensive products of China and Pakistan are more competitive.China’s capital,technology-intensive products are competitive in the international market and Pakistan is weak.Thirdly,using stochastic frontier gravity model to analyze the influencing factors of the development of China-Pakistan Free Trade Agreement,we find that we should pay more attention to the two factors of trade facilitation level and common border for China-Pakistan Free Trade Agreement.The efficiency of China-Pakistan import and export trade is slightly higher than that of export trade,and there is still room for Pakistan to improve its exports to China.Fourthly,according to the local equilibrium model and the general equilibrium model,the WITS-SMART model and the GTAP model are used to analyze the economic effect of China-Pakistan Free Trade Agreement respectively.The results show that the economic effect of China-Pakistan Free Trade Agreement is uncertain and unbalanced.The level of trade facilitation and technical barriers to trade(NTBs)are more important than tariff cuts.Fifth,the impact of the establishment of China-Pakistan Free Trade Agreement on bilateral free trade between China and Pakistan needs to be based on different industries,especially those related to the national economy and people’s livelihood and the future economic development of the country.Based on the theoretical and empirical analysis,this paper analyzes the development difficulties and reasons of China-Pakistan Free Trade Agreement.On the basis of this,the paper puts forward some suggestions to improve the economic effect of China-Pakistan Free Trade Agreement: First,we should establish a reasonable mechanism for the implementation and negotiation of the FTA and accelerate the implementation of the agreement.Second,Pakistan should vigorously promote the transformation and upgrading of industrial structure and improve the competitiveness of products in the international market.Third,take the construction of China-Pakistan Economic Corridor as an opportunity to promote the industrialization development ofPakistan.Fourth,the trade environment of the two countries should be improved and the level of trade facilitation should be improved.At the same time,it is pointed out that the main direction of the second stage negotiation of the China-Pakistan Free Trade Agreement is to further open up the sectors with relatively strong international competitiveness and asymmetric market access to the services trade in the China-Pakistan Free Trade Agreement.Commodities with trade potential but not on the tariff reduction list should be included in the Free Trade Agreement tax reduction framework and focus should shift from tariff barriers to non-tariff barriers.From easy to difficult,there are mainly three ways to upgrade,depending on China’s layout in the South Asian Free Trade Agreement(C+2 mode and C+6 model)respectively.Relying on the China-ASEAN Free Trade area(C+A)model and the South Asian Free Trade Agreement(C+S)model)to enhance the economic effect.