Research On The Trade And Economic Growth Effects Of China’s Participation In FTA

The Free Trade Area(hereinafter referred to as FTA)strategy has been an important part of China’s comprehensive and multi-level opening up strategy.Especially under the influence of factors such as the current global Corona Virus Disease,the war between Russia and Ukraine,and Sino-US trade frictions,it will be of great significance to speed up the construction of a new dual-cycle development pattern by accelerating the FTA strategy and giving full play to its effects on China’s foreign trade&economic growth within the regional free trade agreements.With the advent of the "post-tariff era",while trade dividends from tariff cuts alone between FTA partners are declining,the improvement of the trade facilitation level on the other hand can effectively improve trade efficiency and reduce trade costs,which has become an important part of the current free trade agreement.This dissertation,from the perspective of trade facilitation,aims to explore the mechanism by which FTA promotes trade and economic growth,and to make empirical studies on the trade and economic growth effects of China’s FTA strategy under the dual effects of tariff reduction and trade facilitation.By reviewing the development status of China’s FTA strategy,it is found that though starting comparatively late,while growing rather fast,China’s FTA strategy is currently undergoing a stage of rapid implementation.By December 2021,there have been 26 countries and regions that have formally established FTAs with China.It is now gradually radiating outward,with developing countries and regions as the main players,and neighboring countries and regions as the core.The bilateral trade between China and its FTA partners has become an important part of China’s foreign trade.In 2020,the bilateral trade between China and its FTA partners accounts for 36%of its total foreign trade.The introduction of trade facilitation terms onto the agenda has brought closer trade relations between China and its FTA partners.This dissertation constructs a comprehensive index measurement system for trade facilitation so as to measure the level of trade facilitation of China and its FTA partners.This evaluation system is composed of 4 first-level indicators,9 second-level indicators and 42 third-level indicators of port and logistics efficiency,customs and border management,government and regulatory environment,financial services and e-commerce.Thus,the measurement range is wider,the intersection of the three-level indicators is smaller,and the measurement results are more complete and scientific.The calculation results indicate that the average level of trade facilitation of all FTA partners is 0.64,while China is currently in an upper-middle position.Besides,the level of trade facilitation between China and its FTA partners shows a sign of imbalance.In terms of grading,most FTA partners still stay in the extremely inconvenient zone for trade facilitation,basically remaining stable.and a few countries even show a downward trend.The grade classification has certain degree of stickiness.Among the FTA partners,Singapore,Chinese Hong Kong,Switzerland and Japan are the ones that have achieved high level of convenience for trade facilitation.This dissertation explores,from the perspective of trade facilitation,the mechanism of how the FTA strategy will promote trade and economic growth of participating countries.Firstly,in terms of trade growth,taking the relationship between trade facilitation and trading cost as its research basis,this dissertation refers to the theories of Samuelson(1954),Frankel(1997),Ye Ming and Zhang Lei(2013).By introducing trade cost variables into the CES utility function,this dissertation aims to make an inference on the quantitative relationship between trade facilitation and trade costs.Using the specific measures of FAT as the research angle,this dissertation further investigates the transmission mechanism of how trade facilitation will affect bilateral trade activities.It is observed that increasing a country’s level of trade facilitation is more beneficial for expanding the scale of bilateral trade and has a more significant impact on trade volume than cutting the tariff.Secondly,from the perspective of economic growth,by expanding the macroeconomic model"GTAP-Miniature" of Adams(2005),the relationship between the macroeconomic variables,quantity of physical materials and price index in the model is constructed.Based on the assumption that wages are sticky in the short term and capital cannot flow freely between industries,this research attempts to derive the transmission mechanism of the FTA’s impact on the macro economy by reducing tariffs while enhancing the level of trade facilitation.It is found that the reduction of FTA internal tariffs and the simultaneous improvement of trade facilitation will create greater growth in labor,investment,and consumption,and therefore enable the economy to grow significantly.Furthermore,this dissertation applies the gravity model and the improved Global Trade Analysis Project(GTAP)to verify the expectations of the theoretical model.Examination of the effects on trade expansion shows that the improvement of trade facilitation has led to a 6.11%increase in China’s import scale,which is about twice as large as the import growth brought by tariff reduction alone.At the same time,the improvement of trade facilitation has brought an increase of 4.01%in China’s export scale,compared with the boosting effect of tariff cut,it is about 2 times larger.Examination of the effects on economic growth has found that China’s GDP shows a growth of 0.55%by simply removing tariffs on cargo trade.However,by improving trade facilitation at the same time,China’s GDP growth rate is approximately tripled,achieving an additional growth of 1.24%.In terms of industrial output,cut of tariffs,reduction of time cost for trading and improving trade facilitation will have a significantly positive impact on China’s imports in various industries.This effect is especially more significant for those industries that are time-cost sensitive,such as fruit and vegetable industries and fresh food industry.Imports of the fruit and vegetable industry increased from 6.93%to 18.15%,achieving an additional increase of 11.22%,and imports of the fresh food industry increased from 34.63%to 41.76%,an increase of nearly 1.2 times.The changes in the export trade of various industries in China show differences.The planting industry is the sector with the most obvious export growth among all industries,while the output of most industries in China,driven by export demand,shows an increasing trend.Combining the research conclusions and the current domestic and international situations faced by China’s economic development,this dissertation puts forward policy suggestions from two aspects:comprehensively weighing tariffs and trade facilitation measures during FTA negotiations,and making structural adjustments to trade facilitation measures.In FTA negotiations,trade facilitation should be taken as the key issue,and at the same time,the free trade process of FTA should be accelerated.For China,reform on trade facilitation should be promoted in aspects like improving port infrastructure construction,increasing quality of logistics and information services;giving full play to the role of financial services in promoting trade,and promoting high-quality development of cross-border e-commerce;strengthening border management and creating a favorable Customs environment;standardizing the regulatory environment,as well as improving the rule of law system by meeting international standards,so as to promote trade facilitation reforms and further improve the level of trade facilitation.