Journal of East China Normal University (Philosoph ›› 2018, Vol. 50 ›› Issue (4): 146-152.doi: 10.16382/j.cnki.1000-5579.2018.04.016

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The Expansion Mechanism of Free Trade Agreements Based on a “Domino Effect”

XU Shi-teng   

  • Online:2018-07-15 Published:2018-07-26

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Abstract:

A theoretical model is constructed from the perspective of baseline conditions, a single external FTA, and a dual external FTA to analyze the expansion mechanism of free trade agreements, and particularly the impact of external free trade agreements on the parties of the ongoing FTA negotiations. The results show that market size, marginal production costs, and transportation costs(freight and customs duties) between the two parties are important factors affecting FTA negotiations. Compared with the baseline scenario, when there is a single external FTA, the party that has signed FTA with others increase its motivation to sign FTA, while the party without external FTA members decreases its incentives to sign FTA. In the case of a dual external FTA, the motivation for negotiating new FTA between the two parties has increased, which leads to the continued expansion of the FTA.

Key words: FTA, welfare effect, domino effect