The Empirical Analysis of China-New Zealand FTA

Abstract

The purpose of this paper is to explore the effect of FTA on trade between China and New Zealand, and to measure the changes in the social welfare level by the reduction in tariffs after signing the FTA. And using annual data of imports and exports amount, per capita real GDP, tariff rates, exchange rate and the terms of trade index, dummy variable fta*after, respectively to build panel models. According to the results of the empirical analysis, we conclude that first, GDP growth will boost trade growth between China and New Zealand. Second, the weaker Chinese yuan would help China’s exports to New Zealand. Third, there was inversely proportion between tariffs and both exports and imports. Signing FTA is beneficial to the increase of imports and exports for both China and New Zealand. Finally, the results of export and imports creation speculated by tariffs reduction shown that export creation is far higher than import creation in China, and there are positive effects on trade creation between China and New Zealand when tariffs was lowering.