Economic effects of bilateral trade agreements: China, United States, European Union and Japan

Abstract

Economic integration and international trade among different regions are analysed in this study. It describes recent history and explains a theoretical framework of economic integration. It focuses in Mega-Regional Trade Agreements, more specifically in the biggest ones, TTIP (Transatlantic Trade and Investment Partnership) and TPP (Trans-Pacific Partnership), both of them still under negotiation. These agreements involve the most important economies in the world such as the European Union (formed by 28 countries), United States which is member of both, and Japan. However, China is not a member of any of them and doesn’t seem to be in the near future, but it is a really relevant country and economy in the world. This report analyses which opportunities China should take not to be left behind regarding international trade. Three hypothetical alternatives are developed where China joins US, EU and Japan separately eliminating its tariff barriers with each of them under three different scenarios or degrees of liberalization. Potential economic and trade effects that those agreements will cause for the Chinese economy are analysed specially focusing on welfare, tariff revenue change, trade creation and trade diversion.