Expected Economic Effects Analyses Of The BRICS’ FTA

The concept of "BRIC" was put up as early as 2001. Well, the transformation from a concept to an entity started in 2009. In order to deal with the global financial crisis in 2008 and make some innovation and reform to the traditional structure of global governance, the BRIC countries, as representatives of emerging economies, chose to build "BRIC" Cooperation Mechanism. This measure will ensure the economic development of BRIC countries, while doing good to the recovery of the global economy.In the past six years, "BRICS" Cooperation Mechanism has become more and more pragmatic, and the BRICS’Cooperation Model has also evolved into a multi-level and multi-field form. It still should be noted that, trade, as the important link among BRICS, is subject to low trade facilitation degree and frequent trade friction problems. Under such circumstances, the BRICS countries have realized the importance of free trade and made some endeavors to change the current situation. China and Russia have built cities of free trade along their border, and the FTA Feasibility Study Report between China and India has also been accomplished. All those preliminary works make the BRICS’FTA a potential way to develop trade and an issue on BRICS cooperation agenda.Based on the reality mentioned above, this paper first explores the feasibility of the BRICS’FTA, simulates the BRICS’FTA situation with GTAP model and analyzes its expected economic effects. After that, this paper points out the problems and difficulties needed to be considered in this process, and then puts forward countermeasures and suggestions, hoping to make some contributions to the establishment of the BRICS’ FTA in the future.This paper is divided into six parts. The first part is introduction, describing the background and significance of this paper and clarifying research contributions and shortcomings that may exist. The second part is literature review. By collecting, sorting and reading relevant literature from home and abroad, the writer was able to determine the research direction and logical line of this paper after summarizing all materials into three parts, namely economic development forecast on BRICS, "two thesis" on BRICS, the BRICS development model and the BRICS’trade relationships. The third and the fourth part are the key parts analyzing the feasibility and expected economic effects of the BRICS’ FTA. In order to prove its feasibility, the third part focuses on the BRIGS’economic fundamentals, trade developments and pressures to be dealt with by every BRICS country. Then the fourth part compares the origin data and simulated data given by GTAP to get an overview of the expected economic effects. On the basis of the data analysis in the fourth part, part five first presents possible obstructions on the way of establishing the BRICS’ FTA, such as inconsistent wills of different countries, the external pressure and the possible "double-locking" effect. In response to these difficulties, this paper proposes solutions from the macro level and meso-level, and further puts forward a "three-phase" theory of the BRICS’FTA. The sixth part is to summarize the full text of the whole paper.There are three innovation points of this paper. First, it sets the BRICS’FTA as the starting point, which is studied seldom until now. Second, this paper uses the GTAP model to run some quantitative analysis instead of existing qualitative analysis. Third, in making suggestions on the basis of analyzing results, this paper stands not only on China’s position but also on the BRICS overall perspective, and puts forward a "three-phase" theory creatively, which all have universal significance. At the same time, it should be mentioned that due to the limited level of the writer’s research, there are still shortcomings existing in this paper as follows:the origin data extracted from the GTAP model is 2007 in this paper. There might be some minor error in the process of stimulation because of the changes caused by 2008 financial crisis. Thus, this paper focuses on the relative amount of change rather than the absolute amount of change of the economic variables, in order to reduce data errors. The writer hopes other researchers to address these deficiencies by using plans closer to the actual situation to provide a theoretical basis for the construction of the BRICS’ FTA.