The Impact of free trade agreement between China, Japan, Korea and ASEAN-5 countries on trade

Abstract

As the major economies in Asia, China, Japan, Korea and ASEAN not only play important roles in the regional and global economic system, but also are the main promoters and participants in the regional economic integration cooperation in Asia. ASEAN has successively signed free trade agreements with China, Japan and Korea. The formation of China-ASEAN Free Trade Area, Japan-ASEAN Free Trade Area and Korea-ASEAN Free Trade Area has certain similarities, but the advantages, disadvantages, and impacts of their respective establishments Different. This study aims to evaluate the impact of free trade agreement between China, Japan, Korea and ASEAN-5 countries on trade; And put forward corresponding policy recommendations based on the results. In doing so, the research objectives will be focused on the following. First, this study identified several factors affecting trade volume, and analyzed the results using the trade gravity model and fixed-effects regression model, the relevant trade data of China, Japan, Korea and ASEAN-5 countries from 1990 to 2019. The results shows that the free trade agreement has a positive impact on the trade volume between China and ASEAN-5 countries, has no obvious impact on the trade volume between Japan and ASEAN-5 countries, and has a negative impact on the trade volume between Korea and ASEAN-5 countries. The population growth of China, Japan and Korea is the most important factor in promoting the growth of trade volume between the three countries and ASEAN-5 countries. Second, we use the comparative advantage index to analyze the impact of the free trade agreement on the export products of the three countries, and according to SITC, we divide the export products into three types: resource-intensive, capital-technology- intensive and labor-intensive. This result shows that the free trade agreement has strengthened China's export advantages in labor-intensive products and capital and technology-intensive products, while it has weakened its product export advantages to Japan and Korea. The decline in Japan is greater than that of Korea. Third, the trade potential value predicted by the gravity model in 2019 shows that China-Japan-Korea with Malaysia, Singapore has insufficient trade. China has three countries with insufficient trade, and Korea and Japan have four. Among them, Korea-Thailand has the most insufficient trade potential, and Korea-Indonesia trade is the most sufficient trade potential.