The Trade Structure Effect of China-ASEAN FTA: An Empirical Analysis based on Manufacturing Panel Data of 2000 ~ 2010

Using manufacturing industry data of China and five major ASEAN counties from 2000 to 2010,this paper analyses the impact of CAFTA on Chinese export and clarifies the industrial bias of CAFTA trade effect.Based on these,this paper analyses its implications on China' s future moves in the development of China-ASEAN FTA(CAFTA).Actually,the implementation of FTA strategy is a new attempt in China' s mutually beneficial opening strategy.In 2002,China signed the Framework Agreement on Comprehensive Economic Co-operation with 10 ASEAN countries and this symbolizes the formal initiation of CAFTA.As the first and so far the biggest FTA that China has signed,CAFTA has brought with it some profound impact on the industrial division.In the meantime that it stimulates trade expansion between China and ASEAN,it also brings about some changes in the trade structures of both China and the ASEAN countries which leads to the so called industrial bias of trade structure issue.This issue will influence the distribution of trade benefits among China and ASEAN countries as well as different industries inside China.At the same time,if perceived in a longer-term,it will exert some impact on the healthy and stable operation of CAFTA.According to the theoretical analysis,we can see that the trade of a country is influenced by many factors such as resource endowments,factor intensity of industries,correlation between the upstream and downstream of an industry and etc.On the basis of analyzing determinant factors of trade in manufacturing industries,this paper conducts empirical analysis on the relationship between CAFTA and the trade of Chinese manufacturing industry with GMM methodology.The empirical results show that the internal barrier within CAFTA region strengthens the response of industries with increasing returns to scale and cost-demand linkage to the market potential in China.This means that fall in internal tariff rate is beneficial for the production and export of Chinese industries with comparative advantage;tariff reduction enhances the response of industries with increasing returns to scale and cost-demand linkage to the market potential in China,i.e.,larger tariff gap within and outside the region means that Chinese big market and well-developed industrial foundation are more attractive for industries and these industries will expand their export.Hence,the more and more apparent trade effect in CAFTA is exerting an ever important impact on intra-regional distribution of trade benefits.Considering the trade effect of CAFTA from the angle of benefit distribution requires us to think about promoting the efficiency and effectiveness in FTA benefits distribution in the perspective of structural effect.First of all,an updated version of CAFTA should be actively created so as to make the FTA benefit cake bigger.In the process of upgrading and updating of CAFTA,the emphasis is to promote the liberalization and facilitation of trade and investment and the core is to promote the deepening of financial cooperation.Second,on the basis of making further use of the big market advantage,China should take initiative in sharing the benefits brought by the big market with ASEAN countries.Third,taking full consideration of both internal and external mutual benefit,China should pay more attention to internal welfare distribution.In addition,Chinese industrial policy should lean to industries with increasing returns to scale and high input-output linkage to fully exploit the advantages of these industries and strive for more benefits.Overall,CAFTA is developing healthily.However,problems concerning benefit distribution caused by CAFTA trade effect are embedded in this healthy developing trend.In the setting where competitive regionalism develops globally,the development of CAFTA could lag behind if it does not strive for further advance.Adjusting the and equalizing the distribution to counter the problems brought by trade effect will perhaps be an important issue in future development of CAFTA and a critical issue for China to implement its strategy of building an amicable,tranquil and prosperous neighborhood.