According to international trade theory, export-oriented trade growth will worsen a country's terms of trade, and the deterioration of terms of trade will reduce a country's welfare level. In recent years, bilateral trade between China and Europe has grown rapidly. In order to explore the benefits that China has gained from the bilateral trade between China and Europe, this paper empirically studies the changes in the terms of trade between China and three major European Union countries (Germany, Britain and France) from 65438 to 0993, and analyzes the reasons.
After the EU's eastward expansion in 2004, it became China's largest trading partner for two consecutive years, and China also became the EU's second largest trading partner. The bilateral trade volume between China and Europe has been growing substantially, but the growth of trade volume does not explain the situation that China has benefited from it. Based on the terms of trade, this paper will take China and three major European Union countries, namely, Germany, Britain and France, as examples to explore the benefits that China has gained from bilateral trade between China and Europe, and analyze the reasons.
Basic knowledge of terms of trade
(A) the concept of terms of trade and related theories
Terms of trade is an index to measure the profitability and trade benefits of a country's exports relative to imports in a certain period, which is particularly important in bilateral trade. There are three commonly used terms of trade: price terms of trade, income terms of trade and factor terms of trade, which measure a country's trade income from different angles. Among them, price and terms of trade are the most meaningful and easy to calculate according to the existing data. This paper adopts the terms of price trade.
Price terms of trade, also known as net terms of trade in kind, is the exchange price of a country's exports and imports, and its calculation formula is:
TT=Px/Pm where Px and Pm represent export and import price indices respectively. The increase of TT value means that a country's terms of trade are improved, which means that a country's export price rises faster than its import price (or the export price falls lower than its import price), which means that the country benefits more from trade; On the contrary, the increase of TT indicates that a country's terms of trade have deteriorated and its benefits from trade have decreased.
International trade theory holds that export-oriented trade growth will worsen a country's terms of trade, while import-oriented growth will improve a country's terms of trade. At the same time, according to Krugman's standard trade model: the improvement of a country's terms of trade will increase a country's welfare level; On the contrary, the deterioration of terms of trade will reduce a country's welfare level.
(b) Domestic research on terms of trade
At present, the information on the systematic study of China's terms of trade is "Research on China's terms of trade 1993-2000" published by the International Market Research Office of the Ministry of Commerce, and accepted the research topic of the United Nations. The research shows that from 1993 to 2000, the overall terms of trade index of China based on 1995 decreased by 13%. Later, some scholars studied the overall changes of China's terms of trade. For example, the research of, shows that China's terms of trade decreased by 37% during 1994-2002, and Li's analysis shows that China's terms of trade decreased by 26% during the decade of 1995-2005. However, there are few people who specialize in the changes of China-EU terms of trade. This paper discusses the terms of trade between China and major EU countries.
Changes in terms of trade between China and EU countries
(A) data sources and processing methods
In order to study the changes in the terms of trade between China and the EU, this paper selects the terms of trade between China and three major EU countries, namely, Germany, Britain and France. These three countries are the main members and core countries of the European Union, and the international trade volume between China and these three countries accounts for more than half of the total trade volume between China and Europe. In 2003, the total trade volume between China and these three countries accounted for 56% of the total bilateral trade volume between China and the EU.
Taking Sino-British trade as an example, this paper first explains the calculation method and data source of trade price conditions. We selected 1993 and 2003 (including the latest year of 2003) from the United Nations COMTRADE database, and classified them into three digits according to the third revision of the Standard International Trade Classification (SITC3). It contains the trade volume and value data of most products. Due to the availability of data, and in order to maintain the comparability of data, we excluded the following products: products with unavailable trade volume; Unilateral trade products, such as products that China only imports or exports from Britain; Products that have trade relations only in 1993 or 2003.
After this treatment, we got 150 product groups, of which 1993 accounted for 95% of the total trade share, and the trade share in 2003 was 68% of the total trade share between China and Britain, which can represent the overall situation of Sino-British trade.
According to the import and export trade volume and trade volume of product I, we can calculate the export price Px=Xi/Qx and the import price Pm=Mi/Qm of product I, and then get the price and terms of trade TTi=Px/Pm ... Then we can get an overall terms of trade index by weighting the share of product I in the total trade volume (here refers to the total trade volume of products taken). At the same time, if the weight is a specific category, such as primary products, labor-intensive manufactured goods or capital-intensive manufactured goods, we can also find out the changes in the terms of trade of a specific category.
According to the same method, we can calculate the changes of terms of trade between China and Germany and between China and France.
(B) Changes in the terms of trade between China and the three EU countries
According to the methods listed above, we calculated the overall terms of trade between China and the three countries and the changes in terms of trade of various categories, from which we can see the following characteristics:
1. The prices and terms of trade between China and the three countries have generally deteriorated, and to a greater extent. Among them, the terms of trade of all goods between China and Germany deteriorated by 62%, China and Britain by 3 1%, and China and France by 77%. Moreover, the terms of trade of finished products have also deteriorated, with China, Germany, China, Britain and France accounting for 65%, 28% and 79% respectively.
Although the overall terms of trade have deteriorated, the terms of trade of some products have also improved. For example, Sino-German terms of trade for primary products and Sino-British terms of trade for technology or capital-intensive products improved by 15%, while Sino-French terms of trade for primary products also improved slightly, reaching 3%. For the products with improved terms of trade, China's export price in 1993 was far lower than the import price, but with the continuous increase of export price and the continuous decrease of import price, the price difference between the two became smaller and smaller, indicating the improvement of terms of trade.
3. In the finished products, the deterioration of labor-intensive products is more serious. Although the terms of trade between China and Germany, China and Britain, and China and France have all deteriorated, their performance in capital-intensive or technology-intensive products is better than that in labor-intensive products. The deterioration of labor-intensive products in China, Germany and France is 72% and 75% respectively, while that of capital-intensive or technology-intensive products is only 55% and 45%. Although the terms of trade between China and Britain have deteriorated by 43% in labor-intensive products, they have increased by 15% in capital or technology-intensive products.
4. The terms of trade between China and the three countries have deteriorated to different degrees. Among them, the deterioration of China-Germany and China-France is more serious, both exceeding 60%, while the deterioration of Sino-British terms of trade is relatively light, with a deterioration of 3 1%.
(3) Differences in terms of trade between China and the three EU countries.
Germany is China's largest trading partner in Europe, with rapid growth from 1993 to 2003, with an average annual growth of 16%. Most of China's exports to Germany are light industrial products. Although the export volume is large, the value content is low and the demand elasticity is high. At the same time, China imports mainly mechanical equipment, electronic and electrical products, automobiles and their parts, airplanes, optical instruments, plastic products, steel, steel, copper and its products, organic chemicals and other commodities. German products are of high quality, considerate after-sales service and punctual delivery, which have won the trust of China partners and consumers, but at the same time, the price is also high.
China's exports to France are relatively concentrated. In 2004, the top 10 products exported by China to France were: office machines and information equipment, clothing and fur products, sporting goods and toys, audio-visual receiving and recording equipment and its products, leather products, travel goods and shoes, electrical equipment, sound and image transmission and transmission equipment, metal products, household appliances and plastic products. France imported 10 products with a value of1.21.200 million euros, accounting for 73.5% of the total products imported from China by France in that year. At the same time, Sino-French bilateral trade has grown rapidly in recent years.
Unlike Germany and France, Britain opened to China earlier and its trade growth was relatively stable. Sino-German and Sino-French trade is unstable. Sino-German bilateral trade showed negative growth at 1996 and 1997, and Sino-French trade also showed negative growth at 1996. Sino-British trade has maintained positive growth. Although the growth rate of Sino-British bilateral trade volume (1993-2003) is slightly lower than that of China-Germany (16%) and China-France (17%), it is relatively stable, so the change of terms of trade is relatively less than that of China-Germany and China-France.
Generally speaking, from 1993 to 2003, the terms of price and trade between China and Germany, Britain and France deteriorated significantly, but there were differences in specific product classification and countries. From the product classification, the deterioration degree of finished products is greater than that of primary products, and the deterioration degree of labor-intensive products is greater than that of capital-technology-intensive products. From the national level, the deterioration of Sino-British terms of trade is relatively light.
Reasons for the change of terms of trade between China and EU countries
(A) the overall price terms of trade deteriorated
1. Export incentives such as export tax rebate. In order to encourage export, China government has adopted a series of policies such as export tax rebate and export subsidy. Export tax rebate and export subsidy make many enterprises adopt the strategy of "export only, not domestic sales", because export means reducing costs. At the same time, starting from 1993, China began to reform the highly centralized foreign trade system, further liberalizing the right to operate foreign trade and delegating the right to examine and approve exports. At the same time, China has taken financial measures such as export credit and export credit insurance, established bonded areas and promoted export organizations. In this way, on the one hand, the competitiveness of China's export products is enhanced, on the other hand, the export price level is reduced.
2. The growth of domestic demand for imported products. In recent ten years, China's economy has developed rapidly. On the one hand, domestic enterprises have a growing demand for advanced technology and equipment, foreign raw materials and intermediate products, and their dependence is getting higher and higher. On the other hand, with the improvement of people's living standards, the demand for foreign consumer goods is growing. Demand from both sides has led to a continuous increase in import prices.
3. The existence of a large number of foreign capital in export enterprises. China government has also introduced a series of preferential policies to attract foreign investment. Especially since 1990s, the share of foreign capital in China's export enterprises has been increasing, from less than 30% in the early 1990s to more than 80% in 2005. Most of the foreign capital is multinational companies. In order to reduce tax burden, evade control and transfer funds and profits, they usually import raw materials, intermediate products and machinery and equipment at high prices and export finished products at low prices. That is, the price of imported products has been raised and the price of exported products has been lowered.
(B) the deterioration of the terms of trade of labor-intensive products
1. The labor force in China is cheap and abundant. The labor price in China is very low. In 2004, the annual salary of unskilled labor was below $5,000, and the annual salary of skilled labor was slightly higher than $5,000, far lower than the labor cost in Western Europe-both above $30,000. At the same time, China has a large labor supply. Not only are there a large number of surplus laborers in rural areas who can engage in a large number of low-skilled jobs, but with the expansion of colleges and universities, the competition in the employment market for college graduates is becoming more and more fierce. Adequate supply and fierce competition will naturally depress labor prices.
2. The vicious price competition of export enterprises, especially labor-intensive enterprises. Most of China's export enterprises, especially labor-intensive products, face complete competition, with few brands to sell, low core value and strong substitution; In order to be more competitive among many homogeneous enterprises, these enterprises often adopt low-price strategy, resulting in a vicious circle, which is also evident in the frequent anti-dumping of China's export products.
3. China's competitiveness in capital and technology-intensive products has increased. Different from labor-intensive products, capital and technology-intensive products are relatively weak in substitution. Moreover, with the continuous introduction of foreign capital and advanced technology and equipment, China's competitiveness in capital and technology-intensive products has been continuously improved, so the deterioration of the terms of trade of such products is relatively better than that of labor-intensive products.
In short, in the past 10 years, the prices and terms of trade between China and the three major European countries have deteriorated to a great extent, but the degree of deterioration varies with specific product categories and countries. On the one hand, China should constantly upgrade the industries of capital and technology-intensive products and upgrade the grades of labor-intensive products; On the other hand, when trading with other countries, we should not rely too much on the main products; While the quantity is increasing substantially, we should also pay attention to the changes in terms of trade. It is not a long-term solution to export more and more products at low prices, nor can it be ignored to improve the value of export products and thus improve the terms of trade.
Analysis on the Changing Trend and Problems of China's Terms of Trade
Du zhejun
Abstract: During the development of international trade theory, prebisch's theory of "deterioration of terms of trade" had a far-reaching impact on the development of China. Through theoretical and empirical analysis, this paper holds that China's terms of trade have deteriorated in the process of economic development, analyzes the reasons and puts forward some policy suggestions to improve China's terms of trade.
Text:
/kloc-The theory of comparative advantage put forward by Ricardo in the early 20th century and developed by Hector and Olin in the 20th century demonstrates that international trade is beneficial to all countries from the perspective of comparative cost and factor endowment difference, so it advocates free trade and opposes trade protection. The theory of comparative advantage is therefore regarded as the cornerstone of international trade theory. However, the "deterioration of terms of trade" in the 1950s posed a great challenge to it and had an important impact on the development of contemporary international trade, especially that of developing countries.
1? The content of the theory of deterioration of terms of trade
1. 1? The Theory of Deterioration of Terms of Trade and Its Main Views
The theory of deterioration of terms of trade was put forward by Argentine economist roal prebish in a paper entitled "Economic Development and Main Problems in Latin America" submitted to the United Nations Economic Commission for Latin America in May 1949, aiming at the deterioration of terms of trade of primary products in Latin American countries after the 1929 Great Crisis.
After World War II, one of the most important challenges faced by traditional trade theory is the debate about the terms of trade. Prebisch concluded that the terms of trade of developing countries are deteriorating for a long time. Prebisch believes that there are two main reasons for the deterioration of the terms of trade of developing countries:
First of all, the benefits of technological progress cannot be evenly distributed. Theoretically, if the income of developed countries and weak developing countries can increase according to their respective productivity growth rates, the relative prices of primary products and finished products will be adjusted according to different productivity growth rates. But in fact, the prices of the two do not change strictly according to the changes in productivity. Technical progress has been achieved, and the price of finished products may not necessarily fall. If the income growth of entrepreneurs and production factors is greater than the productivity growth, the price of finished products will rise instead. However, in developing countries, income growth is lower than productivity growth, so the relative prices of primary products in the international market are declining.
Secondly, the monopoly of the finished product market structure. Due to the monopoly position of manufactured goods in the international market, during the period of world economic prosperity, the price decline of manufactured goods is much smaller than that of primary products, which leads to the change of their relative prices, that is, terms of trade, in different directions. The terms of trade of manufactured goods have risen, while the terms of trade of primary products, the main products of developing countries, have inevitably deteriorated.
1.2? Development of the Theory of Deterioration of Terms of Trade
After prebisch put forward this theory, Hans Singh expanded the application field of this theory according to the actual situation of developing countries. Noting that developing countries are exporting more and more manufactured goods, he began to extend the theory of deterioration of terms of trade to the following three aspects: first, the deterioration rate of terms of trade of primary products in developing countries is higher than that in developed countries; Second, the prices of manufactured goods exported by developing countries are falling faster than those exported by developed countries; Third, the high proportion of primary products in the export products of developing countries means that the deterioration of the terms of trade of primary products has a greater impact on them than that of developed countries.
In this way, Singh believes that developing countries can only change the deterioration of terms of trade by exporting labor-intensive manufactured goods instead of primary products, but can not fundamentally solve the long-term deterioration of terms of trade of developing countries.
2? Empirical Analysis and Development of China's Terms of Trade
2. 1? An Empirical Analysis of China's Terms of Trade
Since the reform and opening up in 1980s, China's foreign trade has made remarkable achievements, and in 2003, it has become the fourth largest trading country in the world and an important force to promote the rapid economic development of China. From the development trend, China's foreign trade is very satisfactory, especially the transformation and upgrading of China's export commodity structure, and industrial manufactured goods account for an absolute proportion. This situation will make us feel that the terms of trade in China are much better than before. But is this really the case?
According to the above description of the theory of deterioration of terms of trade, we can know that the decline of a country's export price relative to its import price means deterioration of terms of trade, that is, the country must export more goods in exchange for the same amount of imported goods. From 1998 to 2003, the relative prices of China's exports and imports, that is, the overall terms of trade, decreased by 14.2%, resulting in a negative income effect equivalent to 1.0% ~ 1.2% of GDP in 2000-2003. Among them, the decline in terms of trade of manufactured goods has become the main reason for the overall decline in terms of trade of China. In the same period, the terms of trade of manufactured goods decreased by 14%, and the terms of trade of primary products decreased by 2%. In fact, from 1998 to now, the trend of terms of trade of manufactured goods and primary products is almost the same, but after 1999, they began to go their separate ways, and the terms of trade of manufactured goods continued to deteriorate and the terms of trade of primary products improved. Due to the small proportion of primary products in China's foreign trade, the improvement of terms of trade is limited, which has not brought about the improvement of the overall terms of trade. It can be seen that while China's foreign trade is developing rapidly, the terms of trade have not improved.
2.2? Reasons for the deterioration of China's terms of trade
From the above analysis, we can easily see that the current development of China is very similar to that discussed by prebisch and Singh's theory of deterioration of terms of trade, but China also has its own specific situation. So, what caused the deterioration of China's terms of trade?
(1) structural changes of import and export products. The proportion of manufacturing products in China's export products is on the rise, while the proportion of primary products is greatly reduced. In recent years, the international price increase of primary products is much higher than that of manufactured products. From the export point of view, due to the high technical content and high labor productivity of our products after industrial restructuring and technological upgrading, some products are exported in large quantities, thus depressing the international price. In addition, from the perspective of import composition, due to the rapid economic growth in China, especially the growth of heavy chemical industry production and investment, the demand for crude oil, iron ore and other primary products has greatly increased, and the proportion in imports has also greatly increased. In 2003, China's new iron ore imports accounted for 5 1% of the world's new output, and the new crude oil consumption accounted for 35.3% of the world's new output. Affected by the international political and economic environment, the import prices of these primary products have been rising in recent years. The decline in the prices of export products and the increase in the prices of import products have worsened China's terms of trade.
(2) The result of internal trade of foreign-invested enterprises. Intra-enterprise trade, as its name implies, refers to international trade within the same enterprise, that is, transnational trade between the parent company and subsidiaries of multinational enterprises and between subsidiaries. In reality, multinational enterprises mainly use transfer prices to obtain high profits in intra-industry trade. As far as multinational enterprises are concerned, the transaction price between their internal entities can be determined independently by the enterprises according to the overall planning. In China, multinational enterprises often adopt the strategy of importing machinery, equipment and raw materials at high prices and exporting finished products at low prices, so as to reduce corporate tax burden, avoid risks and control, allocate funds and share costs effectively. However, foreign-funded enterprises have accounted for more than 1/2 of China's trade volume. Therefore, their practices have worsened China's terms of trade.
(3) The tariff system is not perfect. Although China has carried out in-depth reform of the tariff system in recent years, the tariff structure in China is still not reasonable, the phenomenon of "virtual protection" of tariffs is serious, and the actual tariff collection rate is obviously lower than the nominal tariff collection rate. With the average tariff level decreasing year by year, the actual collection rate has not been substantially improved and has not played its due role in protection. Moreover, for processing trade, which accounts for most of China's foreign trade, high tariffs on imported raw materials, machinery and equipment will inevitably lead to high import prices; At the same time, the existence of export tax rebate and import tax reduction and exemption has reduced the price of our products to some extent. This further worsens our terms of trade.
(4) The role of economic globalization. With China's accession to the WTO, there is a growing international demand for China's trade liberalization. With the development of free trade, China's industrial arrangements focus on labor-intensive industries, while ignoring the arrangements for knowledge-and technology-intensive industries. Although this has brought China's comparative advantage into play, in the long run, China's economic development will fall into a "comparative advantage trap". Moreover, because developed countries have more knowledge and technology than our country, the productivity and product renewal speed of developed countries are faster than our country. This has caused the deterioration of China's terms of trade.
3? Policy Suggestions on Improving China's Terms of Trade
As mentioned earlier, China's terms of trade, especially those of manufactured goods, are indeed deteriorating, and with China's accession to the WTO, there is less room for improving China's terms of trade by means of tariffs and quotas, and China's terms of trade may further deteriorate. The trend of deteriorating terms of trade will have a negative impact on the sustained, healthy and rapid development of China's economy. Therefore, we must take corresponding measures to improve China's terms of trade, maintain the sound development of China's economy, and safeguard the brilliant achievements brought about by the reform and opening up.
3. 1? Optimize and upgrade the industrial structure
Because the trade structure of a country is largely determined by the industrial structure of a country, it is an important way to improve China's terms of trade to formulate corresponding industrial policies, realize the upgrading and optimization of comparative advantages and enhance the international competitiveness of export products.
(1) Intensify industrial transfer, vigorously develop capital-intensive industries dominated by machinery and electronics and high-tech industries such as new materials, medical care, biology and information, accelerate the development of knowledge economy, and make the structure of China's export commodities change from labor-intensive to capital-intensive, and more importantly, to knowledge and technology-intensive. Since the reform and opening up, China has actively carried out industrial adjustment. In 2003, the export of mechanical and electrical products accounted for 5 1.9% of the total export, and the export of high-tech products also accounted for 25.2%. However, compared with developed countries, there is still a big gap in the technical level and scale of China's export products. Therefore, we should actively attract the world's advanced technology, improve the technical content of products, vigorously adjust the industrial structure and develop capital and technology-intensive industries.
(2) Because China's labor-intensive and resource-intensive industries occupy a considerable position in trade, we should continue to give play to the advantages of low labor cost and abundant resources in China and carry out modernization. Vigorously strengthen the deep processing of traditional export products, improve the technical content, actively infiltrate new technologies and materials into traditional industries, promote the upgrading of labor-intensive and resource-intensive industries, and regain comparative advantages.
(3) It is also necessary to expand and improve the industrial chain, strengthen the strength of basic industries, vigorously develop the parts processing industry, and reduce the dependence of processing trade on parts imports, thus greatly reducing the negative impact of high-priced imports of intermediate products on the growth of export benefits and promoting the improvement of terms of trade.
3.2? Strengthen the construction of trade associations, import and export chambers of commerce and intermediaries.
Under the condition of modern market economy, competition is guided by market information, especially price information, which is the basis of enterprise management decision. Due to institutional factors, China enterprises have extremely limited access to market information. In this case, it is particularly important to play the role of various trade associations, import and export chambers of commerce and intermediaries, which can undertake many affairs in international trade that should not be managed by the government or enterprises. In China, these associations and chambers of commerce are often semi-official, accustomed to administrative management and seeking their own economic interests. Sometimes they not only can't be good helpers for import and export enterprises, but also cause complications and bring extra burdens to enterprises. Therefore, we should vigorously strengthen the construction of various trade associations, import and export chambers of commerce and intermediaries, make them operate in a market-oriented way, get rid of the government color, and give full play to their positive roles in collecting market information, coordinating industry competition, providing consulting services, and promoting industrial technological progress, so as to promote the development of China's trade.
3.3? Strengthen the reform of tariff system
We should actively promote the reform of the tariff system, optimize the tariff structure and promote the better development of China's trade. It is necessary to gradually abolish unreasonable tax reduction and exemption policies, especially to standardize the tariff policy of processing trade, and strive to guide the transfer of processing trade to bonded areas and export processing zones. At the same time, it is necessary to implement preferential tariff policies for the whole industry, not for individual enterprises and projects; All enterprises at home and abroad should receive national treatment in order to establish a fair competitive environment.
3.4? Intensify the reform of foreign trade enterprises
Improving China's terms of trade is a very complicated process, but we should make great efforts to reform foreign trade enterprises, because foreign trade enterprises are the carriers of import and export business, and only by meeting the requirements of economic development can we promote the healthy and stable operation of China's trade. Therefore, it is necessary to deepen the reform of foreign trade system and truly establish a modern foreign trade enterprise system with clear property rights, clear rights and responsibilities, separation of government from enterprises and scientific management. It is necessary to strengthen the scientific and technological content in foreign trade operations and promote the transformation of foreign trade enterprises from extensive to intensive; At the same time, it is necessary to change the situation of decentralized operation of enterprises, implement the strategy of industry concentration, realize economies of scale and promote the improvement of the overall quality of foreign trade enterprises.
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