On the basis of the national strategy of building Free Trade Areas (FTAs) established in the 17th National Congress of the Communist Party of China, China has increasingly formed a new pattern of international trade with FTAs as the main body and a new pattern of comprehensive opening up. It is an important and urgent task for scholars to evaluate the trade effect of FTAs.
In this paper, we use the Poisson pseudo-maximum likelihood (PPML) estimator with high-dimensional fixed-effects to analyze the impact of different margins and transition periods of tariff concessions on imports in China’s FTAs. The results show that: (1) The average FTA preferential tariffs have decreased gradually, where longer transition periods of tariff concessions lead to greater tariff concession margins. There are large differences of concession margins between products in different tariff concessions and transition periods. Therefore, controlling heterogeneity is a premise for evaluating the trade effect of FTAs accurately. (2) Tariff concessions have promoted imports significantly, and the import substitution elasticity is 6.03. However, due to the FTA compliance cost, the effect is only significant when the concession margin is more than 5%. (3) With the increasing margin of tariff concessions, the import promotion increases gradually; at the same time, the longer the transition period of tariff concessions, the smaller the import promotion, but after the transition period, the promotion has nearly doubled. (4) Different products show different characteristics in response to FTA tariff concession margins and the imports in transition periods. In general, the promotion effect of tariff concessions on agricultural products is not significant; while as to industrial products, intermediate products, non-intermediate products, strategic products and non-strategic products, the promotion effect is significant.
The contributions of this paper are as follows: (1) In terms of the database, it builds a three-dimensional panel database at the country-product-time level, so as to lay a data foundation for systematic evaluation of the trade effect of FTAs. (2) In terms of the estimation method, it uses DID and DDD to identify the impact of tariff concessions on imports in China’s FTAs, uses the PPML estimator with high-dimensional fixed-effects to control the huge three-way fixed-effects, and deals with the problems of “zero value trade”, FTA endogeneity and “multilateral resistance”, which makes the results more reliable. (3) In terms of the perspective, it analyzes the impact of tariff concessions on imports from the perspectives of tariff concession margins, transition periods and different tariff concession margins in different transition periods, and the results are more reliable and have stronger policy-guiding significance.
In general, the research conclusions of this paper provide a more solid scientific basis for further analyzing the overall trade effect and welfare effect of FTAs and steadily promoting the future FTA negotiation and trade policy-making.