A Research On The Home Market Effect Of Sino-european Service Trade

China has made rapid development of trade in goods since China joined WTO in 2001.China has replaced America as "the world’s first nation of trade in goods" in 2013.But compared with trade in goods,the scale of service trade and the proportion in foreign trade are relatively lower causing the poor competitiveness of service trade.EU is the world’ slargest economy,which has become China’s largest service trade partner for the eleventh year by 2014.But under the influence of European debt crisis,the scale of China’s service trade deficit with EU is expanding.European debt crisis becomes even more violent and external demand remains weak,how to increase China’s exporting of service trade,how to enhance its competitiveness and how to improve service trade balance,home market effects provides a new method.Krugman proposed home market effects in "Scale Economies,Product Differentiation and the Pattern of Trade" in 1980.He found firms whichhave economies of scale in production and higher transportation costs,country with larger domestic markets will tend to export goods,then produce home market effects.After that,home market effects is becoming an important motivation to explain the emergence and development of international trade.With the fast development of China’s economy,the labor comparative advantage of China participated in international division and trade is becoming weak.Can China use larger domestic markets to explain service trade exports like other advanced economies?Therefore,this paper uses home market effects to explain Sino-European service trade,which deepens the practical value of home market effects and provides strong and firm support of expanding domestic demand and achieving economies of scale.This paper is divided into six parts.The first part is introduction,including background of the subject,research significance,the structure arrangement,research method,innovation ideas and shortcomings.During the process of literature review,it finds that researches of most scholars focus on manufacturing industry and researches of Chinese scholars focus on service industry and trade in recent years,and that only focus on Sino-Japan and Sino-America in bilateral relations.EU is China’s main service trade partner,meanwhile China is running a large deficit with EU,under the in:fluence of European debt crisis,the scale of China’s service trade deficit with EU is expanding.So it is extremely important to study the home market effects ofSino-European service trade.The second part is the analysis of the theoretical background and mechanism of the home market effects.There are two paradigms in the international trade theory,one is Neo-classical Trade Theory,the other is New Trade Theory,but traditional three kinds of research methods can’t differentiate the two paradigms.In this context,Davis and Weinstein found Idiosyncratic Demand,which produced home market effects.This part analyzes mechanism of home market effects using Krugman(1980)as an example.The third part is the analysis of competitiveness of Sino-European service trade.Using net export,competitiveness index and RCA index,it found that transportation services,insurance services and construction services have strong competitiveness,providingreliable forecast for the next part.The fourth part is the empirical text of home market effects of the Sino-European service trade.It finds that the home market effects cannot be detected in the aggregate service trade,but in the department research,the home market effects exists in transportation and insurance service of ten departments,what’s more,the service trade proportion of two departments from China to European Union is 48 percent after weighting.That is to say,home market effects explains half of all service export of China.The fifth part is suggestions.According to empirical conclusions,this paper gives some suggestions to expand service export and improve trade balance.The last part is conclusion.It tends to summarize the logic of the essay.