Measurement And Analysis Of Bilateral Trade Costs Between China And Major Trade Partners

Since China’s reform and opening up, China’s foreign trade has entered a rapid development for more than 30 years. Especially since 2001, China joined the World Trade Organization (WTO), China has strengthened the economic and trade cooperation with other countries. China is not trade with all countries averagely, but focus on some countries and regions, like the United States, Japan, European Union, Russia, Hong Kong, Taiwan, etc. More than 20 countries and regions constitutes the main trade partners of China’s foreign trade. Many reasons could lead to this situation, this paper from the breakthrough point of trade cost between China and the major trade partners, to explore the influence of trade costs on China’s bilateral trade.This article reviewed Bertil Ohlin’s international trade cost theory and international trade model which includes transportation costs of Paul R. Krugman. And then deduced Novy’s improved gravity model which contains multilateral trade barriers, and calculated the bilateral trade cost between China and 34 major trading partners of China froml995 to 2013. The result of the calculation, the bilateral trade cost between China and the 34 trading partner has declined. And compared with 1995, in 2013 the bilateral trade costs between China and the countries of Asia has fallen by 41%, between China and African countries has fallen by 47%, between China and European countries has fallen by 29%, between China and Latin American countries has fallen by 49%, between China and North American countries has fallen by 21%, and between and Oceanian countries has fallen by36%.After calculating the bilateral trade cost between our country and the 34 trading partners, this paper qualitatively analyzed the factors that may affect the bilateral trade cost, including geography factor, income factors, policy factors, historical factors and infrastructure factor. On the basis of qualitative analysis we selected the top 20 nations of bilateral trade volume with China from the 34 major trading partners during 1995-2013, established regression analysis model which contains distance, per capita income gap, Internet users, common border and WTO variable, quantitative analyzed the influence of these factors on China’s bilateral trade cost. The result of regression shows that the distance has a positive influence on China’s bilateral trade cost, the distance could increase the cost of bilateral trade. Per capita income gap, Internet users and common border and WTO variables have a negative effect on bilateral trade cost, which means trading with developed countries, WTO member states and countries which have a common boundary could reduce the trade cost. Also, the countries have more Internet users could lead the bilateral trade costs down.At last, this paper also gave some advices of reducing China’s bilateral trade costs based on empirical analysis.