China's emerging regional trade policy

Publication Date25 Jan 2008
AuthorLongyue Zhao,MariemRichard MaloucheNewfarmer
China’s regional
trade policy
Journal of Chinese Economic and
Foreign Trade Studies
Vol. 1 No. 1, 2008
pp. 21-35
#Emerald Group Publishing Limited
DOI 10.1108/17544400810854478
China’s emerging regional trade
Longyue Zhao
The World Bank, Gaithersburg, Maryland, USA, and
Mariem Malouche and Richard Newfarmer
The World Bank, Washington, DC, USA
Purpose – The purpose of this paper is to provide a timely review and analysis of China’s regional
trade agreements, its motivations, and its economic implications for Association of Southeast Asian
Nations (ASEAN)-China Free Trade Agreement (ACFTA) member countries and other trading
Design/methodology/approach – The paper uses the SMART model of the World Integrated
Trade Solution to quantify the economic implications of the ACFTA on merchandise trade flows
among member countries and other trading partners. Then, for comparative purposes, the impact of
two possible paths beyond the ACFTA is simulated: an East Asia Free Trade Agreement (EAFTA)
and the possible Doha Round multilateral trade liberalization.
Findings – The paper finds that, if regional and bilateral trade ar rangement (RTA) were only
concentrated in tariff reductions, the impact on trade flows would be quite limited. China’s trade
liberalization will bring the similar impacts to ASEAN in three of the scenarios modeled. Japan and
Korea would get more market access to China if an EAFTA were to become reality. Only in a
multilateral liberalization would all RTA member countries and the rest of the world benefit.
Research limitations/implications – Three limitations are noteworthy. First, these types of
models capture only static gains from trade. Second, the simulations do not include services
liberalization, which could readily provide benefits in several multiples of merchandise trade, and
third, it is assumed that full removal of all border barriers at once, in a multilateral scenario, would be
of illuminating heuristic value but is unlikely to occur in reality.
Originality/value – The paper demonstrates the wisdom of China’s simultaneous pursuit of
unilateral, regional and multilateral liberalization – because the wider the trading group involved in
the liberalization, the more China and its partners will benefit. The tariff reductions in RTAswill have
limited effects on expanding merchandise trade, especially when compared with comprehensive and
multilateral liberalization agreements.
Keywords China, Trade, Economic performance, South East Asia, Free trade, Trade associations
Paper type Research paper
1. Introduction
China has been among the fastest growing economies in the world since it began the
process of economic reform and liberalization in the late 1970s. With an average annual
growth rate of over 9 per cent for the last two decades, China’s output reached $2.65
trillion in 2006. Total trade grew to $1.76 trillion, making China the world’s third
largest trading country, only after the USA and Germany.
Its growing reliance on international trade gave China an interest in international
trading rules. After joining the WTO in December 2001, China has progressively
implemented its commitments. These included among other things substantial
reductions in most fovored nation (MFN) tariffs, progressive liberalization of services
The current issue and full text archive of this journal is available at
The views expressed in this paper are those of the authors, and not necessarily those of the
institutions to which they belong. Discussions with Will Martin, Mona Haddad, Yan Wang, Jiayi
Zou, Zhongxiu Zhao and two anonymous referees are gratefully acknowledged.

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