Study On The Economic Effect Of Establishing China-Colombian Free Trade Area

China’s economy has changed from a high-speed growth stage to a high-quality development stage,and it needs to provide a strong impetus for sustained and healthy economic development with deeper reform and higher level of opening up.Accelerating the construction of free trade zone is an important measure for China to open up at a high level in the new era.At present,China has signed 19 FTAs,10 FTAs are under negotiation,and 8FTAs are under study.China-Colombia FTA are under study in China.Promoting the establishment of China-Colombia FTA is an important strategic deployment in the process of establishing high-standard FTA in China.Firstly,this thesis systematically introduces the related theories of free trade zone,which provides a theoretical basis for analyzing the feasibility and economic effects of China-Colombia free trade zone;Then,from the current bilateral trade volume,commodity import and export structure,major import and export trading partners of China and Colombia,combined with economic openness,trade integration index,dominant comparative advantage index and trade complementarity index,the realistic possibility of establishing China-Colombia Free Trade Area is analyzed in detail Then,the Global Trade Analysis Model(GTAP)model is used to simulate the establishment of China-Colombia Free Trade Area,and the economic effects of the simulation of gradually eliminating tariff barriers and reducing non-tariff trade barriers after the completion of China-Colombia Free Trade Area are measured respectively,the simulation results are analyzed in terms of economic growth effect,welfare effect,trade effect,industrial output effect and competition effect between China and Colombia.Finally,summarized the full text and then the corresponding countermeasures and suggestions are put forward.The research in this thesis shows that the overall trade volume between China and Colombia is on the rise,and the total import and export volume has been increasing in the past five years,except for the decline in 2020 due to the global epidemic.China mainly exports to Colombia Chapter 85 Motors,electrical equipment and their parts,Chapter 84 Nuclear reactors,boilers,machines,mechanical appliances and parts,Chapter 87 Vehicles and their parts and accessories(except railway and tramway vehicles),and imports Chapter 27 Mineral fuels,mineral oils and their distilled products,bituminous substances and mineral waxes.Judging from the index results,in the past four years,the degree of trade integration between China and Colombia and China has exceeded 1,indicating that the trade ties between the two countries are relatively close.There are strong industrial complementarities between China and Colombia.China has a strong international comparative advantage in labor-intensive products and technology-intensive products,and Colombia has a strong comparative advantage in trade-intensive products.It can be predicted that the market potential of trade is huge and there is great room for development.Secondly,the empirical simulation results show that in terms of economic growth,welfare and trade effects,the establishment of China-Colombia Free Trade Area,the abolition of tariffs and the reduction of non-tariff trade barriers will have a positive impact on China and Colombia,and the real GDP and welfare levels of the two countries will be significantly improved,the import and export volume of the two countries will also increase,and the terms of trade will also be improved to varying degrees.However,compared with China,Colombia will benefit more.In terms of industrial output effect,China and Colombia can give full play to their respective advantages in resource endowments and promote the optimal allocation of domestic resources.China’s output in manufacturing increased even more,including beverages and tobacco,textiles and clothing,rubber and plastic products,transportation equipment,other manufacturing industries,leather,paper and wood products,and electrical equipment.Colombian output in primary products increased even more,and agricultural products,fisheries,oil and gas and coal products increased.The total output of China and Colombia has increased with the liberalization of the free trade zone.In terms of competition effect,most of China’s domestic products and factors have increased in price,but the overall impact on the domestic price level is not significant.The Colombian competition effect is more obvious,and the prices of most domestic products and factors have decreased,which is conducive to alleviating inflation.In a word,China and Colombia have a good foundation for economic and trade cooperation,huge trade potential and numerous opportunities for cooperation.If a free trade zone is established,it will bring positive trade creation effects to the region,which will help China and Colombia to build a wider network of free trade zones with their own countries as the hub and achieve steady economic growth.Therefore,China should actively promote the establishment of China-Colombia free trade zone.