Institutional Environment,Institutional Distance and the Deep Integration of CAFTA

Continuous tariff reductions have promoted the rapid development of China-ASEAN regional economic integration,while the role of tariff reduction in promoting trade is becoming limited with the sustained reduction.The era after the realization of CAFTA free trade zone needs to find a new breakthrough to realize a deep economic integration.The theoretical analysis finds that institutional environment and institutional distance affect trade costs.This paper uses the 7 CAFTA countries′ trade panel data of 2002-2009 to make an analysis,and finds that institutional environment and institutional distance do have a distinctive effect on the bilateral trade.The significant differences between CAFTA countries mean that the deep economic integration still has a long way to go,and CAFTA should strengthen the coordination of trade policy and improve the institutional environment for businesses so as to realize the deep economic integration.