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Chinese involved in the study - border effects of East Asia economic and trade cooperation based on the theory and application of gravity model

Author: HuangQingYu
Tutor: ChenJianAn
School: Fudan University
Course: World economy
Keywords: Gravity equation Border effect Free trade area Regional tradeagreement East-Asian economy
CLC: F125.5
Type: PhD thesis
Year: 2012
Downloads: 483
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Abstract

Since Doha Round of World Trade Talks has been suspended, regional integration is going much further than a few decades ago. East Asia, where China stands on, is far less integrated compare to other regions. There are multiple factors causes such circumstance, for instance, historical, political, ethnic issues, along with economic structure and so on. The slower integration process weakened bargaining power of economy entities within the region when they face the counterparts belong to a more integrated region. For that reason, main countries of East Asia started to be bushed together to talk about accelerating integration process. China has made an agreement with ASEAN in2003, hence initiated construction period. The construction accomplished at2011, and now the treaty is completely in force theoritically. During the time, Japan and R.Korea have attained their agreement with ASEAN seperately. The only hard part now is among China, Japan and R.Korea. Whenever the agreement signed, the East Asian Regional Trade Zone will be set. The agreement is expected to achieve someday eventually according to the benefit of each country. After then, almost all major economy entities in East Asia will be among the same Regional Trade Area (RTA). China-ASEAN RTA is the one which went furthest except ASEAN itself, so the development of this arrangement will somehow determine the schedule of East Asia RTA.Considering such circumstance, this dissertationwill focus on the role China performs during the construction of China-ASEAN FTA. At which level we have integrated into ASEAN FTA? Compare to any country of ASEAN, how many additional obstacles are there lining in front of us when we trade with an ASEAN country? Given the current level, if China is going to push East Asia RTA further, in which direction we’ll put in energy?In order to answer these questions, we have to lucubrate on traditional gravity equation. Under the basic assumption of new economic geography and measurable differentiation, infer to a nonlinear gravity equation at the base of an adjusted untility function, which is believed to be more appropriate to East Asian analysis. For a even better accommodation to East Asia, we still need to analyse our objects, from economic, geographic, demographic, and cultural factors, to those status how a country trade with outside world. We again modified our model under those understandings.Base on the data availability, we compared the border effect between China and ASEAN, with that among ASEAN. We employed multilayer models to observe significance level of certain factors. The models include fixed-coefficient and variable coefficient; basic and extended; total volume of trade and unilateral trade; linear and unlinear; and so on. We will find if the consequences follow our theories, and adjust during the process to make sure the regressions tell us a real world. At the base of this research, we will apply Japan as a reference, compare it with China. Because of the similar influence of this country pair during East Asia RTA construction, the comparation is useful to us to know how far we went. In the meantime, it is also useful to us to make a better explaination of our final outcomes.We’ve eventually discovered a reversed U type trend line after China initiate FTA construction process with ASEAN.2005-2006there reaches a climax, and dramatically declined thereafter. It is now very close to that level among ASEAN countries. Japan adopted another different way to cooperate with ASEAN, which spared them from the rise part, and continuously declining, at a slower rate. Apparently, Japan-ASEAN has a much stronger border effect compare to China-ASEAN, so they can promote bilateral trade simply by accelerate the idea it inplemented or is implementing at present. If China still act as a outsider, and put most of the resource to try to become the same as ASEAN countries, that will be much less useful. Potential bilateral trade volumn is about to achieve, so we can only reach the point by modulate our trade structure, and lead ASEAN countries to be more opened, put down the inner border effect within ASEAN.

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