| The idea of establishing CAFTA originated from the "10+1" conference hold in Singapore in 2000. At that time Premier Zhu conceive of establishment of CAFTA. After construction of a free trade region, the wider market, severe competition, increasing investment and expanse of production scale will lead firms to increase R&D investment, thus resulting in technological progress. After a general and brief review on relative theory of CAFTA, this article brings forward the concept of regional economic integration, and analyzes the several theories. After set up of zollverein, it produces two static effects of trade diversion and trade creation, and other dynamic effects. Hence, on the basis of regional economic cooperation, China could integrative cooperates with foreign trade, and integrates all kinds of regional advantages of foreign trade to form strength of economic scale. Meanwhile, with deepening of integration cooperation, it will strengthen regional competition, promote sound allocation of sources, and stimulate to increase regional investment to promote increase of regional economy. For establishment of CAFTA, the harmony of macroeconomic policies is very crucial. The article analyzes the static effects, dynamic effects and structure effects from fiscal and monetary policies angle of view. Static effects mainly include regional economic scale and complementary economy. Dynamic effects are analyzed from three effects of trade diversion, trade creation and export extension. It can be obvious to see from above effects analysis that construction of CAFTA could be advantageous for every partner. Anyway, we have to notice that it is not easy to construct CAFTA, because it will confront many difficulties. The last part of the article summarizes these difficulties at first, on basis of which we discuss the choices of policies on establishment of CAFTA, which include increasing profits of integration, lowering integration costs, profits harmonies and controlling of integration process. |
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