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The Growth Of International Economy

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The growth of international economy is significantly being driven by trade liberalization. The concept of free trade was firstly presented by Francisco de Vitoria in 16th century (Nussbaum, 1947). Then two early economists Adam Smith and David Ricardo proposed the concept of liberalization trade and applied the theory to practice. Since the end of World War II, the United Sates devoted itself into reducing tariff-barriers and free trade. As a result, the United States led the establishment of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) (World Trade Organization, 1997). FTAs as a tool of trade liberalization can effectively utilize resource allocation, stimulate competition and increase capital…show more content…
For dynamic panel data model, it is used to eliminate deviation which leads to the inaccurate result of the research (Anderson & Cheng, 1982). In addition, several factors are considered in the models, including the time effect, distance between units, common language, common land boarders, trade policy, the level of domestic product and trade policies (Lira, Lee and Lee, 2012). According to the results of the research, Lira, Lee and Lee (2012) concluded that there is less insignificant difference in benefits of participating in FTAs between rich and poor countries and signatory members can benefit significantly from joining FTAs, increase of trade flows from 200% to 220% using the most reliable estimation techniques. It can be clearly seen that FTAs guarantee the economical fairness among the members, while the members benefit economic interest. However, critics asserted that FTAs cannot maintain fairness among members because of the trade asymmetry. For instance, through establishing the dynamic panel data model and analyzing the Europe Agreement (EA), Caporale, et al. (2012) believed that FTA causes an increase in trade deficits for member and trade asymmetry because of the existence of economic and technological gaps between members. According to the statistics, it can be seen that FTAs of Central and Eastern European countries (CEEC-4) deteriorated the trade balance by over 0.12% of GDP (Caporale, et al., 2012). In other words, as the difference of economic
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