Study on Economic Effects of CJK Free Trade Area: Simulation Analysis based on GTAP Model

Abstract

China, Japan and Korea are the three most important economies in East Asia, accounting for 70% of the Asian economy. The differences in industrial comparative advantages among the three countries have laid the foundation for the establishment of the FTA. The GTAP model is used to plan and group 140 countries and 57 industrial sectors respectively, and the changes and impacts in GDP, welfare level, import-export volume, terms of trade and other aspects after the establishment of the CJK Free Trade Area were evaluated through simulation under different scenarios. It is found that after the establishment of the CJK Free Trade Area, the output structure of the three countries will be adjusted to different degrees, and the economy of the three countries will grow with it, and the net welfare of the three countries will also increase accordingly. In terms of the change of FTA on the terms of trade, Japan and Korea, especially Japan, will get a greater degree of improvement. Global trade will increase further, and that the overall net benefits of the world will increase, giving positive effects on the world economy, culture, and politics.