The Trade Effect Of China-asean Free Trade Area

In recent years,while the economic globalization has developed in depth,the development of regional economic integration,which is dominated by free trade zones,has been developing rapidly.More and more countries have given them equal or even higher priority than multilateral trade.The competition in international trade has moved from the individual game between countries to the group game among countries.At present,most countries and regions in the world have participated in different forms of regional trade arrangements and signed regional trade agreements.China-ASEAN Free Trade Agreement(CAFTA)came into being under the background of regional economic integration.In 2002,the establishment of the Free Trade Zone began,and in 2010,China-ASEAN Free Trade Area was formally established.This is the first time that China has taken the initiative to establish a free trade zone with other countries and it is also the first free trade zone of ASEAN.CAFTA becomes the third largest free trade zone after the European Union and the North American Free Trade Area.The establishment of CAFTA has deep economic foundation,international environment and geo-environmental support.However,the current economic level difference between ASEAN countries and the overlapping of comparative advantages also limit the further development of the free trade zone.Therefore,research on the economic and trade effects of the China-ASEAN Free Trade Area after its completion will help the two sides to better carry out the construction of the free trade zone.Combined with relevant theories and empirical tests,this paper first reviews the theory of customs union and the theory of free trade zone,expounds the different characteristics and nature of the static and dynamic effects of trade,and establishes the basis for empirical analysis.Then from the actual point of view,it reviews the background and trade status of the China-ASEAN Free Trade Area,the comparative advantages and trade intensity of the two sides,and the obstacles and challenges in the construction process.In the empirical stage,this paper uses a theoretically justified gravity model of trade to examine the trade effect of China-ASEAN Free Trade Agreement from the perspective of both static effect and dynamic effect.The model is tested on a sample of 21 countries(China,ASEAN-10 and China’s top 10 trading partners in 2017)over the period dating from 2000 to 2017 using aggregated export and import data.For static effect,in order to obtain unbiased estimates,time fixed effect and individual-specific fixed effect which is designed to capture all the unobserved heterogeneity that are specific to each country but are constant over time are included in the specifications as regressors.The results indicates that CAFTA leads to substantial and significant trade creation among CAFTA members,and export expansion of nonASEAN members to China.There is no trade diversion effect in China.Instead,China also imported more goods from non-ASEAN countries.The establishment of CAFTA increases the trade gains not only for intra-bloc members but also extra-bloc members.For dynamic effect,by using time series data to do cointegration analysis,we finds that there is a positive and long-term equilibrium relationship between ASEAN’s economic growth and China’s trading with them.CAFTA also boosts the investment of both sides.Finally,this paper puts forward corresponding suggestions on the development of the free trade zone based on the status quo of the free trade zone.China and ASEAN should use their unique economic advantages and resource advantages to adjust their industrial structure,promote the transformation and upgrading of the trade industry,and thus reduce intra-regional trade competition.At the same time,China should also make full use of the One Belt and One Road policy,actively integrate into the construction of the free trade zone,and achieve the cooperation and upgrading of the free trade zone in the financial and investment fields.