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The Static Trade Effects in China under CAFTA——Empirical Analysis Based on the Gravity Model

CHEN Han-lin TU Yan  
Through establishing two gravity models and using the panel data of 22 sample countries and areas from 2000 to 2004, this paper investigates the static trade effects in China after starting to establish CAFTA (China-ASEAN Free Trade Area). Firstly, this paper introduces some developments in the gravity model focusing on studying bilateral trade and trade effects and points out the novelty of this paper. Then, through the empirical test, we find that the trade diversion effect is much larger than the trade creation effect and the trend is that the gap between them will become larger and larger. This is different from the opinion of some Chinese researchers. After that, this paper gives the reasons for that. Finally, this paper recommends that future research can be focused on analyzing the trade effects in some certain industry.
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