Strategic Trade Policy With China

Based on the so-called new trade theory (NTT), Strategic Trade Policy (STP) draws different conclusions from free trade, i.e. the rationality of trade intervention measures to a certain degree under the premises of scale economies and imperfect competition. Upon the introduction in 1 980s. STP attracts much attention of both developed and developing countries. After careful examination of STP's theoretical foundation and main arguments, this thesis gives an objective analysis and remark of its policy conclusions, and intends to explain whether it is possible to improve national economic benefit and enhance international competitiveness given the current condition of China by adopting STP. In the light Of the above thinking, this thesis has the following structure. Chapter one first explains theoretical origin and realistic reason for the birth of STP, then gives out the whole structure of STP from the viewpoint of theoretical development. Chapter two mainly introduces the three arguments of STP, i.e. grabbing market shares by giving export subsidies to domestic oligopolistic firms; extracts monopoly profit of foreign firms by using tariff; import protection is used as export promotion. Chapter three analyzes STh conclusions from the viewpoint of economic theory and political economy of trade policy, which arrives at the following conclusions, namely economic analysis demands us to be cautious when using STP; political economy analysis emphasizes the necessity of free trade. Finally empirical studies of STP are conducted, which shows the benefit improvement from STP, if any. is quite small. Chapter four explains whether China is possible to adopt STP and gain from it based on her current situation of scale economies and imperfect competition. What's more, this thesis puts forward a new trade theory, called complex comparative advantage theory, by summarizing the relative arguments of traditional trade theory, new trade theory, and new institutional economics. According to this new trade theory, this thesis explains how to look at the different influences of free trade and STP on trade development, economic growth, and international competitiveness enhancement.