This research is setting up a free-trade zone model between multi-countries, which is based on the Footloose Capital Model in the New Economic Geography Theory, including comparative advantages, factor endowment and capital income tax, and gets conclusions by strict mathematical and empirical analyses. From the research we find that: (1) The establishment of the free-trade zone will have damage to external countries, then these countries have motivation to enter into the free-trade zone, which illustrates the establishment of the free-trade zone has the " domino effect”; (2)As the level of integration increasing, the member country who is at a disadvantage position will be marginalized, which will lead to a spatial imbalance inner free-trade zone, and then will affect the stability of the free-trade zone, while members can sustain the stability by transfer payments and differentiated opening policies; (3)The root cause of Britain’s departure from Europe is the spatial imbalance caused by the deep integration of EU, and the Britain exiting from EU has its consideration to avoid taking responsibility to EU, but for Britain, maybe it is not the best choice to exit from EU for self-interest maintaining. The conclusions of this paper are of great significance to the development of China’s regional cooperation. According to the conclusions of the paper, China should not only actively participate in or establish regional trade groups at all levels, but also foresee their spatial imbalance and instability. However, in view of the complexity of inter-country transfer payments and the lesson of Britain’s departure from Europe, we should adopt differentiated opening policies with the outside world as much as possible to resolve the instability of regional trade groups. When negotiating with powerful countries, we should avoid excessive integration with them; while negotiating with weak countries, we should maintain appropriate integration with them. In this way, we can not only gain the benefits of integration, but also avoid the negative effects caused by over integration. This article reveals the operational mechanism of regional trade blocs, and provides a theoretical support for China’s regional economic cooperation strategies. Besides, the multi-country FTA model established in this paper can be easily extended. Therefore, it has high theoretical values and application values.
/ Journals / Journal of Finance and Economics
Journal of Finance and Economics
LiuYuanchun, Editor-in-Chief
ZhengChunrong, Vice Executive Editor-in-Chief
YaoLan BaoXiaohua HuangJun, Vice Editor-in-Chief
The Domino Effect, Space Imbalance and Stability for the Free-Trade Zone — A Brief Analysis of the Reasons for the Britain Exiting from EU and Its Enlightenment to China
Journal of Finance and Economics Vol. 44, Issue 09, pp. 123 - 136 (2018) DOI:10.16538/j.cnki.jfe.2018.09.008
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References
Summary
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Cite this article
Liu Junhui. The Domino Effect, Space Imbalance and Stability for the Free-Trade Zone — A Brief Analysis of the Reasons for the Britain Exiting from EU and Its Enlightenment to China[J]. Journal of Finance and Economics, 2018, 44(9): 123-136.
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