Journal of Applied Economic Research
ISSN 2712-7435
Effects of Reciprocal Trade Negotiations and China’s Belt Road Initiative
Fan Yong, Wanru Wang
Abstract
Since the beginning of the 21st century with intensified competition in international trade and sluggish development of the economy, a gradual rise of trade protectionism has followed. China, determined to promote free trade, has proposed trade connectivity with the so-called Belt and Road (BRI) countries in the "The Belt and Road" initiative. To study the different effects of free trade on China and the BRI countries, this paper uses the newest GTAP 9.0 model and conducts six simulations of different approaches to trade liberalization including reducing tech barriers (unilateral and bilateral), reducing tariff (unilateral and bilateral), and reducing both tech barriers and tariffs (unilateral and bilateral). It turned out reciprocal negotiations to reduce trade barriers would maximize the benefits pertaining to economic aspects and trade for both sides. The positive effects of reducing non-tariff barriers were larger than when using tariff restrictions. Moreover, this study found that countries located near China, including Thailand, Malaysia, Indonesia and Singapore, would reap more benefits. Economic indicators such as GDP growth, social welfare in the non-BRI countries especially Asian countries would suffer most in case of lower trade barriers between China and the BRI countries. The second-largest negative impact is to European countries. Briefly cutting barriers to trade would promote the growth of economic development and trade volume.
Keywords
Belt and Road Initiative; GTAP 9.0; non-tariff barriers; tariff; trade liberalization; Effects.
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About Authors
Fan Yong – Philosophiæ Doctor in Public Finance, Professor, School of Public Finance and Taxation, Central University of Finance and Economics, Beijing, China (No. 39, South College Road, Haidian District, Beijing 100081); e-mail: yongfan008@sina.com.
Wanru Wang – Post-Graduate Student, School of Public Finance and Taxation, Central University of Finance and Economics, Beijing, China (No. 39, South College Road, Haidian District, Beijing 100081); e-mail: accwang@163.com.
For citation
Fan Y., Wanru W. Effects of Reciprocal Trade Negotiations and China's Belt Road Initiative. Bulletin of Ural Federal University. Series Economics and Management, 2018, Vol. 17, No. 5, 798-822. DOI: 10.15826/vestnik.2018.17.5.036.
Article info
Received August 8, 2018; Accepted September 19, 2018.
DOI: http://dx.doi.org/10.15826/vestnik.2018.17.5.036
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