2012.12-Working Paper-Trade Facilitation and Poverty Reduction The Case Study on China-ASEAN Region

Trade Facilitation and Poverty Reduction: The Case Study on China-ASEAN Region
Xiaoshu Wang1, Junfang Guo1 and Laping Wu1

1．Trade facilitation and its Impacts on Poverty
1.1 Definition of trade facilitation: concepts and scope
　　Up to now the researches on trade facilitation are mainly conducted by some international economic institutions, such as the Organization for Economic Cooperation and Development (OECD), the Asia-Pacific Economic Cooperation （APEC), the Economic Social Commission for Asia and the Pacific (ESCAP), the World Customs Organization (WCO), the United Nations Conference on Trade and Development (UNCTAD).
　　Trade facilitation can be traced back to the first half of twentieth Century, however, there is no universal or generally accepted definition by different international institutions, many international organizations, including WTO, WCO, APEC, ICC, OECD, have put forward their own definition. Definition of Trade Facilitation by the WTO can be summarized as follows (1998):“the simplification and harmonization of international trade procedures, where trade procedures are the activities, practices, and formalities involved in collecting, presenting, communicating, and processing data and other information required for the movement of goods in international trade.”.
　　Trade Facilitation became a topic of discussion in the WTO at the Singapore Ministerial Conference in December 1996, when Members directed the Council for Trade in Goods “to undertake exploratory and analytical work . . . on the simplification of trade procedures in order to assess the scope for WTO rules in this area”(Singapore Ministerial Declaration (paragraph 21)).
　　After several years of exploratory work, WTO Members formally agreed to launch negotiations on trade facilitation in July 2004, on the basis of modalities contained in Annex D of the so-called“July package”. Under this mandate, Members are directed to clarify and improve GATT Article V (Freedom of Transit), Article VIII (Fees and Formalities connected with Importation and Exportation), and Article X (Publication and Administration of Trade Regulations). The negotiations also aim to enhance technical assistance and capacity building in this area and to improve effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues.
　　WCO defines trade facilitation as “to secure the removal of unnecessary restrictions by applying modern techniques and technologies, while improving the quality of controls in an internationally harmonized manner”.
　　ICC defines trade facilitation as: “to improve the efficiency of the processes associated with trading in goods across national borders.” The definition by APEC is “the simplification and rationalization of customs and other administrative procedures that delay or increase the cost of moving goods across international borders”. OECD defines as “the simplification and standardization of procedures and associated information flows required to move goods internationally from seller to buyer and to pass payments in the other direction”.
　　ESCAP (2009) summarized these different definitions and defined trade facilitation as the policies and processes that reduce the cost, time, and uncertainty associated with engaging in international trade but excludes traditional trade instruments such as tariffs, import quotas, and other similar nontariff barriers.
　　Domestic scholars also give their own definition. Sun Zhongying (2009) think trade facilitation generally refers to reducing the transaction costs of buyers and sellers of goods and services cross-border flows, caused by an unnecessary administrative burden. Shan Junlan, Zhou Ping (2012) points out that trade facilitation is the simplification and harmonization of procedures to enhance the transparency of trade policy and to reduce trade costs involved in international trade activities.
　　It is easy to see that simplification, harmonization of procedures is the core of all definitions. Among these concepts and there is no conflict in principle, just a different focus of the supply chain. However, these definitions can be classified to two types: the narrow and broad. The narrowest definitions limit trade facilitation to customs and other border operations such as border measures However, the broader definition of trade facilitation covers both international trade procedures and associated information flows, and payment along the entire supply chain, which including some behind the-border measures such as product standards and conformity assessment measures,
business facilitation, e-commerce, trade finance, and logistics services.
　　In recent years, the broad definition of trade facilitation is usually adopted in practice, including infrastructure improvements, administrative simplification and so on. In short, trade facilitation covers all the trade process, with customs procedure and cross-border system as the core, the other aspects are also gradually paid more attention, such as transportation, licensing, quarantine, electronic data transfer, payment, insurance and other financial requirements, enterprise information.
　　From the measures of trade facilitation, they can be classified to 4 categories, the convenient transportation, simplified customs procedure, efficient institutions / policy, and the convenient e-commerce. This report will analyze trade facilitation from the above four perspectives.
1.2 Trade facilitation and its impacts on poverty
　　The impacts of trade facilitation on poverty are mainly through economic growth and income distribution. Trade facilitation can directly improve the free trade, and then the trade will affect poverty reduction in different channels. The mechanism is as follows.

　　From a macro point of view, trade liberalization affects economic growth mainly through good/service trade and capital flow and then further influences poverty reduction. This transmission mechanism includes: (1) impacts on
economic growth through price changes, factor mobility, technological change; (2) impacts on economic growth through the capital flow (especially foreign direct investment) which affects technological progress, employment and factor allocation; (3) the impact of economic growth on poverty. The impacts of economic growth on poverty depend on the characteristics of the economic growth. If economic growth occurs mainly in poor areas then it will contribute to poverty reduction, or if economic growth is based on the increase in employment, it is also usually helpful to poverty reduction.
　　This macro level transmission is based mainly on the theories of economies of scale, endogenous growth theory and the international transmission of price fluctuations of monetarism. (1) The theory of economies of scale focuses on production expansion which is caused by an export increase, and this raises production efficiency, and thus benefit. The expansion of export industries and shrinking of import industries cause resources to be reallocated optimally, which affects factor income and the poor; (2) endogenous growth theory focuses on the shock of technology and economic system on economic growth, which means the growth of national income and personal income, and of course this includes the poor people; (3) open economy model of the monetarist model studies the effects of international commodity price transmission and capital flows, and through these two kinds of effects two countries influence each other.
　　From a micro point of view, trade liberalization affects poverty reduction mainly through employment, factor income and consumption etc., this includes: （1）impacts on poor people through employment; (2) impacts on poor people through government’s transfer payment to poor people;（3 ）impacts on poor people through consumption especially food consumption.
　　This micro level transmission is based mainly on the theories of H-O-S and Stolper-Samuelson theorem. H-O-S theory shows that the factor prices will tend to be the same in different countries though trade; this means that the labor wage will be affected by trade, which will influence the poor labors. Stolper-Samuelson theorem argues that the factors in export industries (the abundant resource endowment) will benefit from trade, however, the factors in import industries (the scarce resource endowment) will suffer. The factor movement from low return import industries to high return export industries will cause factor income redistribution and poor labor will be affected.
　　Figure 1 is the schematic diagram of trade liberalization mechanism and its impacts on poverty. It relates to international markets (trade), government, firms and residents (poor people), and the specific transmission process includes the following:



Figure 1 Diagram of trade liberalization mechanism and its impacts on poverty

(solid line is vale flow, showing the important impacts; dotted line shows the indirect impacts）

　　Note: Theoretically, the impacts of trade liberalization are mainly based on economic growth and income distribution and transmitted through current account and capital account. The economic growth is reflected by firm and farmer’s production, income distribution includes factor return in markets and transfer payment by government.

　　Firstly, from international macroeconomics, trade liberalization starts from good/service trade (under current account) and capital flow (under capital account), and exchange rates affect these two channels. The direct manifestation of trade liberalization is: (1) tariff and non-tariff barriers are gradually reduced or removed and the distorted subsidies on exports are also reduced or removed; (2) from the direct and indirect investment, capital should be allowed in or out more freely. Capital flow between countries is mainly determined by interest rate and affected by exchange rate. A Free Trade Agreement (FTA) is a direct and comprehensive type of trade liberalization.
　　Secondly, the ending point of this mechanism is poverty change. This ending point is mainly affected by three aspects: (1) as producer/labor, the poor people get payment from selling factors to firms; (2) for those poor who have nothing, they still can get transfer payment from governments; (3) as agricultural producers, they can get income from
selling their products, but as consumers, they need to pay for food and other consumption goods, therefore they will be affected by markets and prices.
　　Thirdly, between the above starting and ending points there are different transmission channels, in which goods and service trade is the most important, but the impacts of direct and indirect investment mainly occur through enterprise production. For the poor, indirect investment, which mainly refers to buying stock and bonds etc., will not affect them greatly since they have not much money to buy these assets. Foreign direct investment (FDI), which refers to setting up a company, affects the poor mainly through employment.
　　Fourthly, through the channel of goods and service trade the world price is transmitted to one country’s border (border price), then it is further transmitted to domestic wholesale and retail markets, finally affecting production (growth effects) and factor return (distribution effects).
　　Fifthly, the inseparability of production and consumption for the farm household makes farmers face two markets when they make a production decision: as a consumer, price change will directly affect their purchasing power and living standard negatively; as a producer, their income/consumption is positively affected by agricultural product prices. The net effect will depend on the balance of these forces.
　　Sixthly, the relationship between government and poor people is through the transfer payment by poverty alleviation policies; the transfer payment can be in the form of cash or providing food or other goods or services, including training or education.
　　Finally, the transmission mechanism may be shocked be exogenous changes, for example, economic crisis, natural disasters etc. This round of economic crisis caused the number of poor people to increase by 100 million in the world. Each earthquake, flood or typhoon also will increase poverty.
　　In all trade facilitation improve trade liberalization, free trade can improve economic growth, if this growth take place in poor area, the poverty will be reduced or eliminated. Meanwhile, the income distribution policy can also affect poverty. This is shown in many previous researches.
1.3 Methodology of trade facilitation analysis
1.3.1 CGE simulation
　　CGE (Computable Generally Equilibrium) is the widely used method in international trade analysis. It assumes that all markets in one country reach equilibrium (including trade balance), then simulate the situation when the system were shocked under different scenario.
　　UNCTAD (2001) uses CGE model to study trade facilitation, the results showed that the broader trade facilitation need a good environment for e-commerce, and an one percent reduction in the cost of transportation could increase GDP by $3.3 billion in Asian countries.
　　APEC also built CGE model to study trade facilitation, it showed that the reduction in trade costs within its group members is different, and due to the reduction in trade cost the export of APEC countries would increase by 3.3%.
　　Hertel, Walmsley and Itakura (2001) apply CGE to analyze the impacts of the higher standard of e-commerce and automation of customs procedures between Japan and Singapore. They found that the reform will increase trade flows between these countries and the rest of the world.
1.3.2 Gravity model
　　Wilson，Mann and Otsuki (2003) use Gravity model to study the impacts of trade facilitation on trade flows . They constructed an index with four indicators to mesure trade facilitation: port efficiency, customs environment, regulatory
environment and e-commerce. The results showed that port efficiency had the significant positive effect on trade flows; regulatory barriers had negative effect on trade. Asia Pacific Foundation of Canada (1999) evaluates the relative importance of three trade facilitation measures. The research by Australian Foreign and Trade Ministry and the Chinese Ministry of Foreign Trade and Economic Cooperation (2001) shows that the transfer of trade electronic documents will reduce trade cost by about 1.5% -15% of import cost (C.I.F). Freund and Weinhold (2000) studies the role of e-commerce in trade, it showed that a 10 percent increase in the number of web hosts in one country would increase trade by 1 percent in 1998 and 1999.Fink, Mattoo and Neagu (2002) studies the communication and its impacts on trade, it shows that a 10 percent decrease in the bilateral communication fee of phone calls would bring an 8 percent increase in bilateral trade. Moenius (2000) assesses the share of trade standards, which showed that the share of trade standards could improve trade. Otsuki, Wilson and Sewadeh (2001a, 2001b) apply gravity model
to study trade facilitation, it shows that a stricter food standard (such as 10% of aflatoxin contamination) of EU countries would reduce the export of cereal by 4.3% and nuts and dried fruit by11% in Africa.
　　Chinese scholars carry out researches based on gravity model in recent years. Sun Zhongying (2009) applies the gravity model to study the role of trade facilitation; the results showed that the elasticities are different for different trade facilitation measures. Port efficiency has positive effects in bilateral trade, either importers or exporters. Xie Juanjuan, Yue Jing (2011) do empirical analysis on China - ASEAN trade using gravity model. Shan Junlan, Zhou Ping (2012) also build gravity model to analyze the impacts of trade facilitation on China-Asean trade. By using Gravity Model, Shan Junlang and Zhou Ping (2012) studies the impacts of trade facilitation on Chinese trade, and they also compare the trade facilitation and tariff reduction, which shows that trade facilitation can improve trade greatly than tariff reduction. Yang Li (2011) reviews and compares the methods which are often used in trade facilitation analysis. He/she also applied the gravity model to study the impacts of trade facilitation on Chinese trade.
1.3.3 Other methods
　　Based on the research of Wilson，Mann and Otsuki (2003), OECD (2003) decouple the trade costs into direct costs (information and documentation fees) and indirect costs (delays etc), and they use the data from Wilson，Mann and Otsuki (2003) to study the impacts of the improvement of trade facilitation in single member of OECD countries on trade. The results show that in most regions, the export increase faster than import. South Asian countries have the biggest potentials in both export and import; their export gains are greater than import gains. On the contrary, in Africa and the Middle East the exports are less than imports because of their low participation in global manufacturing system. The research by ESCAP (ESCAP) (2009) shows that in the long term, trade facilitation could increase the trade competitiveness and foreign direct investment, and provide SME with more opportunities of participating in international trade. In addition, their research also shows that, due to the trade facilitation, the trade cost could be reduced 1%-15%, depending on product type, transportation and traders. Anderson and Van Wincoop (2004) study the import and export cost of industrialized countries, it shows that the information facilitation could save 6.0% of product trade value, and transit facilitation could save 9.0% of trade value. The research by Japan Foreign Trade Organization (2002) shows that trade facilitation could save import cost by 0.5-1.2% of trade value in Japan.
　　Chinese scholars also did researches on trade facilitation with different methods, but mainly focusing on qualitative method. Zhu Yongqiang,Gao Zhengqiao (2003) analyze the costs and benefits of trade facilitation, they argue that the cost included (1) idea changes and restructuring of trade, (2) investment on automation and computerization of trade agencies, and (3) tariff losses. But compared with cost, trade facilitation brings huge economic benefits to the traders and government. Wan Nings (2007) thinks the aim of trade facilitation  is to reduce the transaction costs of customs and port. Zhang Qingqing (2007) analyzes the process of trade facilitation and China's policy, they think that trade facilitation can reduce transaction costs, increase business opportunities and promote economic development. They also argue that the trade facilitation cost in developing countries include capacity-building cost, international forums cost, tariff losses and unfavorable trade deficit costs, the dispute settlement costs, the change of ideas and restructuring of trade, and possible temporary unemployment etc.. In short, almost all of the researches show that the trade facilitation benefits are very significant, and exceed the cost.
　　Wang Huiyan, Wang Jian, Ji Xiaotian (2008) argue that trade facilitation plays an important role in the economic development，especially the procedure simplification and for developing countries. The study pointes out that trade facilitation benefits include enhancing policy transparency, saving time, increasing corporate profits. Sun Lin, Xu Xufei
(2011) studies trade facilitation of ASEAN countries and its impacts on Chinese manufacture industry export. It shows that the airport infrastructure improvements in ASEAN countries contribute greatly to manufactured goods exports to China. 1% increase in ASEAN airport infrastructure quality will cause 1.48 percent increase in manufactured goods exports to China. But the improvement of customs procedures and trade barriers are not significant. On this basis, the authors simulate the impact of the ASEAN trade facilitation on the export of manufactured goods to China. The results show that, assuming each ASEAN country airport infrastructure quality could reach the regional average, then the export of Chinese manufacturing products to ASEAN countries would increase by 39.34%. If the quality grade of airport infrastructure in each ASEAN country could reach the highest level in ASEAN region, the export of Chinese manufacturing products to ASEAN countries would increase by 70.95%.
2. Literature review on trade facilitation
2.1 Measurement and evaluation of trade facilitation

　　Zhang Yu (2010) uses the Analytic Hierarchy Process (AHP) to assess trade facilitation levels in 54 countries, it shows that Singapore reaches the highest level, followings are China Hong Kong and Sweden. Germany ranks at 8, the United States ranks at 10, Canada ranks at 13, Japan 15, and China mainland ranks at 34. Finally this research points out the detailed trade facilitation measures in the purchasing, customs procedure, product inspection, logistics chain and payment. Zhou Qian (2007) also uses AHP to evaluate the trade facilitation of 48 countries in 2003 including China. The results show that a country's trade facilitation level is the most important factor to attract the traders; the major trade partners of China all get high score in the AHP assessment. Wang Xiaochen (2010) compares trade facilitation levels of the US, the EU, Japan, Singapore and Australia, reviews the development of trade facilitation in the world, summarizes the obstacles of trade facilitation, and provides the suggestions to improve China’s trade facilitation. Shen Minghui (2009) applies Wilson’s (2003) Index System to estimate the level of trade facilitation of the East Asian countries. Based on the Analytic Hierarchy Process (AHP), Zeng Zheng and Zhou Qian (2008) build the index system to measure trade facilitation, then test the relationship between trade facilitation and export of China using Gravity model, the results show that China's trade facilitation is at a low level, and the trade facilitation level of trade partners is an important factor affecting Chinese trade.
　　Yang Li (2011) uses perceiving data to evaluate the level of China trade facilitation, and comprehensively summarizes the experiences of trade facilitation of other countries, including the cross-border inspection cooperation of North Europe and the institutions design of Swedish trade facilitation, a single window system of Singapore, the advance single system in Japan, the audit system after customs procedure in South Korea and the U.S. Customs experience in risk management.
2.2 Terms of trade facilitation, WTO negotiation processes, and positions of Members
　　Considering the terms of trade facilitation, more researches are on the provisions of the WTO agreements. So far, WTO on trade facilitation has not reached a united protocol, but it has already formed some basic clauses, these clauses are dispersed in WTO agreements. The article 5, 8 and 10 of GATT1994 are the core provisions on trade
facilitation. Other relevant provisions are as follows, Agreement on Customs valuation, Agreement on Import Licensing Procedures, Agreement on Pre-shipment Inspection, Agreement on Rules of Origin, Agreement on Technical Barriers to Trade, Agreement on Sanitary and Phytosanitary Measures. Some researches analyzes the terms of the WTO related to trade facilitation from different angles, including process and defects of the terms, put forward the suggestions on Chinese institutional arrangements of trade facilitation and how to adapt to the relevant rules of the WTO trade facilitation (Li Bin, 2006; Liu Yang, 2006; Liu Ping, 2007; Zhu Xiaofei, 2008; Wang zi, 2008 and Yang yang, 2008). Zhou Qian (2007) studies terms of trade facilitation in the WCO and APEC framework. Li li(2011) studies the rules of origin from the perspective of trade facilitation, and it shows that the US, the EU and Japan all take strict measures on the rules of origin when facing import from other countries, but for their product export try to provide the convenient helps. Therefore, China should balance the trade security and trade facilitation in designing, revising and implementing the rules.
　　Kuang zengjie (2007) reviews the process of trade facilitation negotiations of the WTO under the Doha Development Agenda, focusing on the major issues and prospects. Huang Jianwei (2005) analyzes the major issues of trade facilitation negotiation and provides the major countermeasures for Chinese government in negotiation, which includes improving trade facilitation rules, emphasizing negotiations on technical assistance and capacity-building. Li Jin(2009) reviews the Doha Round negotiations on trade facilitation and analyzes Member's positions, generally the developed countries, represented by the EU, Japan, actively advocate to form new restricted rules, however, the Brazil representing the developing countries, disagree. The developing countries tend to depend on Members themselves to implement trade facilitation voluntarily, China supports for the multilateral constraints, but do not think that the constraint should be subject to WTO dispute settlement mechanism. This research also argues that "Singapore issues" will be separated for future negotiation; technical assistance will be inevitable, binding rules should be based on Member’s needs, the position of developing members will be the key to the negotiations. Sun Zhenyu (2005) analyzes the major disputes among WTO members, including whether to make new rules of trade facilitation with WTO framework, whether to make the binding rules, and whether subject to the dispute settlement mechanism.
2.3 Trade facilitation impact on poverty
　　So far there are few studies on the relationship between trade facilitation and poverty reduction. From the mechanism of impacts of trade facilitation on poverty, we have known that the major channels are through trade and economic growth. In the above we have reviewed the impacts of trade facilitation on trade and economic growth. Here we mainly review the impacts of trade on poverty.
　　There are debates on the impacts of trade liberalization on poverty reduction, with some arguing that based on the static and dynamic effects of international trade on economic growth, poor people in developing countries can benefit from trade liberalization. Traditional trade theory focuses on the static effect of international trade, which can improve optimal resource allocation and economic growth. Endogenous growth theory focuses on positive dynamic effects of international trade, which can make importing countries get new inputs and advanced technology so as to raise its productivity and improve economic growth.
　　However, others argue that trade benefits are mainly controlled by the richer countries/people; trade liberalization cannot benefit the poor. Their points of view include: (1) in the short run the static effect of trade is uncertain; (2) economies of scale and learning by doing cannot be realized in developing countries in short run; (3) trade liberalization would enlarge the wage disparity and worsen unemployment and poverty, due to the impacts of imports on unskilled labor; and (4) trade liberalization is not conducive to human capital accumulation, thereby limiting the income increase of poor people. Table 1 lists the major empirical research on the effects of trade liberalization on poverty reduction, which shows for most countries trade liberalization can improve poverty reduction. The case studies on China also show the positive impacts.



3 The trade facilitation practice in China
　　From the definition of trade facilitation we know that trade facilitation mainly include four components: transportation, customs clearance, institution and policies, and e-commerce.
　　Transportation facilitation mainly refers to infrastructure construction, including whether ports, canals and other water transportation could meet the business requirements, whether the air transport promotes the country's commercial development, whether the infrastructure maintenance and development have scientific planning and adequate financial support etc.; Customs facilitation refers to simplifying the Customs procedure through new technologies so as to increase the efficiency of customs clearance; As for the institution and policies, it mainly refers to trade related rules and policies, including whether competition-related laws and regulations limit the unfair competition effectively, whether the protection of intellectual property rights is fully implemented, whether the legal and regulatory framework promotes the competitiveness of enterprises, whether the government policy is transparent, and whether bureaucracy, bribery and corruption have hindered the commercial and trade activities; The last is e-commerce, which includes hardware and software environment for e-commerce development.
3.1 The overall development of trade facilitation practices in China
　　China's trade facilitation has been promoted continuously with the process of China's reform and opening up, from a single department to multiple departments, from a single link to multiple links, from the improvement of trade management to the extensive application of information technology, which has showed a high-level, wide-range, all-around feature. Since the reform and opening up, China had firstly reformed the foreign trade management in a large scale, and substantially reduced the product types and scope which import quota were implemented. After joining WTO, China's foreign trade policy has been inclined to more actively participate in regional financial, trade and economic cooperation, such as the construction of the China-ASEAN Free Trade Area, promoting trade and investment facilitation cooperation within the scope of the Shanghai Cooperation Organization, and actively pushing forward transit transport agreement negotiations among three countries of China, Russia and Mongolia, as well as making the appropriate arrangements in many ways to propel the development of trade facilitation.
　　The amendment of "Foreign Trade Law of the People's Republic of China” in 2004 fulfilled its WTO commitments in advance and implemented the registration system of foreign trader, which created a more liberal foreign trade and business environment for enterprises. The State Administration of Foreign Exchange and General
Administration of Customs signed in December 2011 a memorandum of cooperation to jointly promote foreign exchange reform of goods trade, so that two sides could strengthen supervision and information exchange including the import and export goods declaration data of enterprises, other electronic data of the receipt and payment in goods trade and so on, and then they could share the data and effectively promote the trade facilitation.

3.1.1 Port construction and efficiency in China
Port construction and achievement
　　Port is the gateway to a country, and the port function and efficiency are essential to national or regional economic development and social prosperity. With the accelerating development of global economic integration and trade liberalization, it has increasingly become an important indicator for measuring a country's competitiveness whether the port management is smooth and the clearance is efficient. After years of effort, the modernization of Chinese ports has been greatly improved; especially the modernization of the coastal ports is close to advanced level in developed countries. Chinese ports have reached the international advanced level in some aspects such as ports construction and loading and unloading equipments.
　　According to data released by the National Bureau of Statistics of China, from 2005 to 2010 China's coastal port construction investments have been more than Chinese RMB 350 billion yuan, and a number of large-scale, specialized ports have been built along the Yangtze River, the Xijiang shipping trunk and the Beijing-Hangzhou Grand Canal. Until the end of 2010, there were 96 ports above designated size and 32148 quay berths for production, of which there were 1659 over ten thousand tons. The container throughput of the ports above designated size was 130.6 million TEUs. China's port throughput has been the top one in the world for six consecutive years and port construction has made remarkable progress. In 2011, the top five Chinese port throughput were 691 million tons of Ningbo Port, 620 million tons of Shanghai Port, 451 million tons of Tianjin Port, 429 million tons of Guangzhou Port, 380 million tons of Suzhou Port. Port berths have developed in a large-scale and specialized direction.
　　In recent years, China Air Transport has also developed rapidly. Civil Aviation Administration of China has signed air services agreements with 114 countries and regions at the beginning of 2012, including 43 Asian countries and regions. China's aviation transportation enterprises have opened up a total of 443 international routes and navigable cities have reached 125 around the world. Asian regional routes were 143 and there were only 29 navigable Asian cities. China and ASEAN countries have opened up the third and fourth freedom, and the close communications have been maintained between China and Northeast Asian countries including Japan and South Korea to ensure that the bilateral air transportation relationship has been improved.
Laws and regulations on port construction
　　In 2003, "Port Law of the People's Republic of China”was enacted and came into effect at the beginning of 2004, which adjusted the administrative system of the Chinese ports and established a administration system that ports were administrated directly by the local governments and separated government functions from commercial business. “One port one administrative institute and unified management”, ports resources can be rationally utilized through port planning, management of the coastline and rational distribution; it is established that construction and operation of the port system by diversified investment entities and business entities; a series of institutions are also established including the port business access system, the open and fair competition system, the protection system of port infrastructure, the safe production system of port and the supervision system for safe transportation of dangerous goods.
　　According to “National plan for coastal ports”jointly issued by Ministry of Transportation and the National Development and Reform Commission, national coastal ports will be divided into five port groups in terms of port situation in the region, transport relations among ports and the rationality of the main cargo transport, they are Bohai Rim, Yangtze River Delta, the southeast coast, the Pearl River Delta and the southwestern coast respectively. At the same time, the national coastal ports have formed 8 transport systems including coal, petroleum, iron ore, container, food, commercial automobile and passenger transport. Recently, coastal ports have gradually formed a convenient and efficient waterway system for passenger and freight transportation, which has a rational layout, a clear structure, explicit functions and the feature of saving resources. The overall competitiveness of China's coastal ports is significantly improved, which is basically adapted to the development of the country's economic, social, trade and defense needs.
The international cooperation of port construction
　　As to international cooperation, since 2002, China has successively participated in the APEC Transportation Ministerial Meeting. The third transportation ministerial meeting in 2002 focused on how to further strengthen communication and collaboration among members and improve the traffic safety. The joint statement issued on the
fourth transportation ministerial meeting stressed that the primary goal of the transportation cooperation among members was to make trade liberalization and facilitation. The fifth transportation ministerial meeting emphasized the importance of strengthening the pragmatic cooperation in transport facilitation as well as safety and security field, and the joint statement adopted at the meeting highlighted the need to boost trade facilitation by promoting the standardization of transportation management procedures and mutual recognition among economies. At present, most of the ports in China have begun to try to use a container tag and implement the intelligent management of container transport, which has greatly enhanced the efficiency of container clearance and unloading and improved the transportation security.
　　During the Fourth China-ASEAN Expo in 2007, China and ASEAN held the“Port co-operation and Development Forum”successfully. Ministers attending the meeting agreed that the port is an important link to connect the economic and trade intercourse in the logistics chain. Along with the advancement of the China-ASEAN Free Trade Area and the continued growth of trade in the region, shipping demand is growing, and therefore set higher demands for port services. The representative of the Ministry of Transport to attend the first meeting of senior officials of the China-ASEAN Port Cooperation put forward the following recommendations: establishing talks mechanism and Port Cooperation between China and ASEAN counties, promoting the port infrastructure and inland waterway construction to facilitate the customs clearance.
　　The theme of the Seventh Conference of Ministers of Transport in September of 2011 was "the APEC security, stability and sustainable balanced development ", and unanimously adopted "the Joint Ministerial Statement of the Seventh APEC Transportation Ministerial Meeting." The Joint Declaration encourages members to further strengthen cooperation in the field of transport, and promote security, stability and sustainable growth of the APEC transportation.
3.1.2 The reform and development of China customs procedures
　　Customs is a key department for international trade, about 98% of the global trade will be through customs. The efficiency of customs clearance will directly and greatly affect trade cost. Therefore many countries take active measures to reform its customs so as to improve international trade.
The Reform of China customs procedures
　　"Golden Customs Project" was officially launched in 2001, which is targeted to promote the electronic clearance in order to save time and cost. The core of golden customs has two parts: one is internal clearance system and the other is external port electronic system. As an important part of the "Golden Customs Project", the China Electronic Port has established a public data center and data exchange platform relying on national public telecommunication network. Based on the electronic data interchange (EDI) center, the customs network has connected with other government departments and enterprises, such as industry and commerce departments, administration of taxation, foreign exchange, quality control, transportation, banks, and enterprises It strengthens the supervision and management and improves the efficiency of trade, reduces trading costs, and is of great significance to promoting trade.
　　In 2002 the internet-connected big customs clearance system was overally implemented all over the China. The cooperation between bonded area and port was also officially launched in the eastern coastal areas in 2004. This can take full advantages of coastal ports and bonded area to speed up the flow of goods and increase trade efficiency.
　　In 2005, the regional customs reform was launched. It aims to integrate the costal port and inland customs resources, standardize and simplify customs procedure, facilitate the import and export, reduce the costs of customs clearance, improve customs clearance efficiency. In October 2005, the trials of inter-regional customs cooperation reform was launched in 11 customs of Yangtze River Delt, Pearl River Delt and Bohai Rim region, including Shanghai, Nanjing, Hangzhou, Ningbo, Guangzhou, Shenzhen, Beijing, Tianjin. In April 2007, seven cities, including Tianjin, Shanghai, Fujian, Qingdao, Ningbo, Guangzhou and Shenzhen, jointly signed"Customs Clearance Cooperation Framework Agreement between Part Coastal Provinces and Inland Six Provincial Ports". The agreement proposes to build a cooperation platform between central regions and the coastal areas, and encourages innovating measures to simplify customs procedures and actively implement 24 hours reservation system. For product export,“apply in origin, check in port" are introduced, this save time and cost greatly.
International cooperation
　　The Chinese Customs has built the friendly exchanges relations with 117 countries or regions. China has carried out extensive cooperation with ASEAN in capacity building since 2003. In addition, the Chinese customs continue to broaden cooperation, and promote China-US, China-EU customs exchanges in traditional areas, including law enforcement, statistics, country of origin, technical cooperation, and trade facilitation, as well as anti-terrorism, protection of intellectual property rights. To promote the implementation of“International Trade Security and Facilitation Standards Framework" of the World Customs Organization (WCO), China and the EU jointly launched "China-EU Safe and Smart Trade Lanes Pilot Program" and "Authorized Economic Operator (AEO) ", and promote China-EU trade facilitation.
3.1.3 The development of Chinese institutional environment
　　After joining the WTO in 2001, China has greatly strengthened the trade-related legislation. In 2004, the Foreign Trade Law was revised and international trade was liberalized. The rights and obligations of foreign traders are protected; the environment of import and export are greatly improved. In accordance with the rules of the WTO, China has revised and improved the related laws or rules, including trade remedy system, customs supervision and import and export inspection and quarantine system
　　In order to improve the fair competition, Chinese government also enhanced the competition-related laws and regulations, including Anti-monopoly Law, Anti-unfair Competition Law, Price Law, Advertising Law, Product Quality Law, Patent Law etc. For protecting Intellectual Property Rights (IPR), several laws has been enacted and implemented, including the Patent Law of the People's Republic, Trademark Law of the People's Republic, Copyright law People's Republic.
　　As an important department for the implementation of border protection of intellectual property rights, China Customs has established a perfect intellectual property rights enforcement system, including declaration auditing, inspection of imported and exported goods, detention and investigation of the infringing goods, punishment of illegal import and export, and disposal of infringing goods. In October 1995, China firstly promulgated and implemented the “Regulations on Customs Protection of Intellectual Property Rights” and in December 2003 it was revised and customs are given more rights to punish the illegal trade.
　　For the International cooperation of IPR protection, China actively participated in and fulfilled the international protection of IPR conventions and treaties. After Joining the World Intellectual Property Organization in 1980, China has successively joined the Paris Convention for the Protection of Industrial Property, the Patent Cooperation Treaty, the International Classification the Locarno Agreement of the International Classification of Arts & Crafts designs, the International Registration of Marks of the Madrid Agreement, and Trade related Intellectual Property Rights Agreement, more than 10 international conventions.
　　The principle of transparency is an important part of the WTO rules. As a WTO member, China periodically notifies its policy to the WTO and publishes all its policies through different ways, now Chinese governments publish the Communique of National People's Congress Standing Committee, the Bulletin of the State Council, the Bulletin of Ministry of Commerce and so on. The information of Import and Export management are published in newspaper International Business. General Administration of Customs publishes China customs statistics. Customs regulations, import and export tariff rates and customs procedures are published in the “Bulletin of State Council” and other Medias.

3.1.4 The development of E-commerce and the construction of related laws
The development of E-commerce
　　E-commerce in China has been developing fast since 2002. In many areas, such as production, trade, transportation, finance, tourism, e-commerce plays more and more important roles. Cross-border e-commerce is becoming more active. The online purchases and sales of large enterprises increase year by year.
　　The e-commerce in small and medium-sized enterprises (MSE) also increasing rapidly, the use rates of online trade and marketing reaches 42.1% in MSE in 2010. Online retail transaction grows rapidly and the average annual growth rate reaches 100.8% from 2005 to 2010, its share in total social retail sales of consumption goods increases year by year. The online retail market scale reaches RMB 192.4 billion yuan in the second quarter 2011; during the first half year online retail transaction reaches RMB 370.7 billion Yuan, increasing by 74% compared with the same period in the last year.
　　During the development of e-commerce, the related support system has also developed rapidly. From 2005 to 2010, the support systems such as e-commerce platform service, credit service, e-pay, modern logistics and e-certification are all accelerated. The related enterprises serving for e-commerce, such as e-commerce information, transaction and technologies are emerging, and the number is up to 25 thousand in 2010. E-commerce information and transaction platform is becoming more and more professional and integrated.
　　The improvement of social credit environment also contributes much to credible e-commerce transactions. New payment service system, such as online payment, mobile payment and telephone payment, grows rapidly; the size of the third-party e-payment grows by nearly 60 times from 2005 to 2010. Meanwhile modern logistics develops fast during the development of e-commerce.
　　The rapid growth of e-commerce also benefits from the continuous improved economic circumstance. During the “eleventh five-year” period (from 2005 to 2010), network infrastructure in China improved continuously, the user number grows quickly, until 2010 the internet penetration rates reaches 34.3%, the number of internet users reaches 457 million, mobile phone users 859 million, in which 47.05 million are 3G users. With the improvement of
internet service ability, use fees are gradually lowered.
Policies to promote the development of e-commerce
　　In order to improve the development of e-commerce, the central government makes a series of policies and regulations (table 2). With the new policies, laws and regulations on e-commerce enacted, the e-commerce development environment, supported by laws, regulations, policy and industry, is gradually emerging. The environment for e-commerce development is becoming matured.
　　In summary, China’s trade facilitation has made great progress, but in fact it is still in its early stage not only in the world but in Asia, China's trade facilitation level is relatively low, there is a big gap with developed countries in many aspects. For example, the overload runs of port, poor transparency of policies, and unbalanced development of e-commerce etc., which means that China has great potentials in improving trade facilitation.



3.2 The cases of trade facilitation practice in China
3.2.1 The reform of Ningbo bonded area
　　Since joining the WTO, China’s economy grows rapidly, fulfills the commitments seriously, and China also participates actively in the new round of multilateral trade system. Generally China has established an image as a responsible big country in the WTO and makes important contribution to safeguard the benefits of developing members. Reform of customs procedures is an important symbol of China's commitments to implement trade facilitation. Ningbo bonded area for example, after 20 years of exploration and development of Special Zone, has become an important window for China's opening up and development of export-oriented economy.
　　Ningbo Free Trade Area was approved to be set up by the State Council in November 1992, divided into three districts in the east, west and south, total area of 2.3 square kilometers. It is the only bonded area in Zhejiang province. The region enjoys a policy of“Exempt, tax-free and bonded” specially supervised by the Customs, it is one of the economic area of China in which the policy is most favorable and the opening-up level is highest. The bonded area has three main functions: import and export processing, international trade, warehousing and logistics. In order to adapt to the rapid development of foreign trade, Ningbo bonded area has taken a series of reforms.
　　First of all in the Customs has developed application information management system to the customs area of Ningbo bonded area, Ningbo Export Processing Zone Customs information technology-assisted management system and the Ningbo Bonded Logistics Park information management system and other related systems, it
is the first to implement regional information management model among all the bonded areas in China. Regioal "e-Customs" plays more roles. Through these systems the goods, enterprises and the whole area are under the effective monitoring of the Customs. On this basis, the area integrated and upgraded new information management systems of special supervised areas, and accelerated the construction of smart card port clearance system, carefully built a “wise park” combined with monitoring, clearance and information center. Now enterprises in the area can do all kinds of customs procedures without going out on the e-customs platform linked by network to the customs, without the restrictions of region and internet location.

Table 1 Facilitation measures in Ningbo Bonded Area



　　In order to support the restructuring and development of regional “Bonded Economy”, Ningbo bonded area has also developed a special regional clearance guidelines, actively assists the bonded area administrative committee to attract investment; creates special channel for local and special products, implements on-site inspection services, strongly supports enterprises to expand goods exhibition, implements the priority of declaration and clearance to imported wines and fruits in hot days, making a good customs environment.
　　In the construction of promoting international trade demonstration area, Ningbo bonded area gained strong support from many departments related to the national inspection, the foreign exchange, the business and the taxation as customs special supervised areas (Table 3).
　　Ningbo Free Trade Area Customs innovate and reform customs procedures of "paperless customs clearance", "centralized declaration, the declaration in advance," "classification clearance” and other measures.
　　Average time of import clearance reduced from the original 10.2 hours to 7.7 hours, and export clearance from the original 51 hours to 43.6 hours, generally saves time by about 20%. Regulatory models are being optimized, powerful regional electronic customs, and enhance the level of trade facilitation.
3.2.2 Cross-border RMB settlement
　　Since the outbreak of the international financial crisis, the most important international trade settlement currencies of the US dollar and the Euro have experienced severe fluctuations. In order to cope with the international financial crisis, and help Chinese enterprises to avoid the risk from the US dollar and other international settlement currency exchange, to promote trade and investment facilitation, during "the11th Five-Year Plan" period (2005-2010), the China jointly with relevant departments to take a series of flexible and effective measures, actively develop cross-border trade and investment RMB settlement pilot, and guide the healthy cross-border circulation of RMB, to strengthen risk monitoring.
　　Since September of 2008, the State Council has made a series of the strategic plan to accelerate cross-border trade in RMB. In July 2009, some cities spearheaded cross-border trade RMB settlement pilot, such as Shanghai, Guangzhou, Shenzhen, Zhuhai and Dongguan, they started to use RMB as clearing money in the trade with Hong Kong, Macao and ASEAN countries.
　　Cross-border trade RMB clearing pilot has been welcomed by local governments, banks and the trading enterprises, many import and export enterprises request to join the pilot. In order to meet the needs of the RMB settlement of cross-border trade, in June 2010, approved by the State Council, People's Bank of China, and other five Ministries jointly issued the “Notice on issues related to expansion of RMB clearing pilot in cross-border trade”， cross-border trade areas expand to 20 provinces/cities including Beijing; the pilot includes the RMB settlement, trade in services and other current account payment; enterprise can freely choose RMB as payment tool in trade with any partners from any countries or regions. Import, cross-border trade in services and other current account settlement are no longer limited to pilot enterprises. For export, RMB settlement pilot enterprises also increase from 365 to over 67,000. From July 2009 to the end of December 2010, the cross-border trade in goods and services and other current account trade reached 509.3 billion yuan RMB. During the same period, the cross-border investment and financing through RMB reached 70.17 billion yuan.
　　People's bank of China also actively collaborates with other countries or regions. This cooperation includes bilateral currency swap agreements and bilateral currency settlement agreement. To maintain the regional financial stability since the global financial crisis, from December 2008 to the end of 2010, the People's Bank of China has signed a total of 803.5 billion yuan bilateral currency swap agreements with the Bank of Korea, Hong Kong Monetary Authority, the Malaysian central bank, Bank of Indonesia, Central Bank of Belarus, Central Bank of Argentina, Central Bank of Iceland and the Monetary Authority of Singapore. Along with the international economic and financial situation improved, the function of the currency swap agreement gradually shifts from a response to the crisis to support trade and investment. In March 2010, the People's Bank of China and National Bank of Belarus signed the Sino-Belarus bilateral currency settlement, which means that the payment and settlement between two countries can use RMB or Belarus money. The agreement expands the bilateral settlement money from neighboring countries to non-neighboring countries for the first time, from the border trade to the general trade.
4. China - ASEAN cooperation and trade facilitation practice
　　On November 4, 2002, the leaders of China and 10 ASEAN countries signed the China - ASEAN Comprehensive Economic Cooperation Framework Agreement, which decided to implement the “early harvest "program from 2004 in advance to reduce and cancel tariffs of 600 kinds of agricultural products. In 2003，China and ASEAN officially launched customs cooperation, in recent years the China-ASEAN customs cooperation has made great achievements due to the efforts of both sides: a regular department consultation mechanism and expert customs coordination commission consultation mechanisms (CCC) are setup, which promotes the rules of origin negotiations between China - ASEAN Free Trade Area.
　　On November 29, 2004, the Trade in Goods Agreement were signed, about 7000 tariff lines would be reduced since July 20, 2005. In 2009 China's average tariff of trade with ASEAN countries dropped to 2.4 percent. In October 2009, in the China-ASEAN Customs and Business Cooperation Forum, the delegates signed the Nanning Initiative of China-ASEAN Trade Facilitation, agreed to strengthen cooperation between China and the Free Trade Area countries. On January 1, 2010, China - ASEAN Free Trade Area was fully built, the bilateral economic and trade relations entered a new stage, bilateral trade between China and ASEAN have become more closely.
　　The China-SEAN economic and trade cooperation report (2010-2011) shows hat China is the third largest trading partner of ASEAN; ASEAN is China's fourth largest trading partner. Economic and trade between China and ASEAN countries are strongly complementary. With the expansion of trade and relations, how to reduce and eliminate obstacles hindering the trade, reduce transaction costs, establish efficient trade facilitation system has become an important content of China-ASEAN trade and economic cooperation.
4.1 Impacts of ASEAN Trade Facilitation on Chinese Trade
　　There are two characteristics in ASEAN trade facilitation measures. Firstly, the ASEAN countries emphasize business partnership and cooperation. The ASEAN customs take the following measures to improve trade facilitation: establish the united customs window to provide service and to coordinate each member. Unify trade declaration form among ASEAN, introduce electronic customs, so save time and cost of customs clearance and unify commodity classification and valuation system, to simplify ASEAN taxation regulation and promote customs transparency, stability and consistency. Through years’ efforts, the clearance time is greatly reduced from several days to two hours. The Green Pass makes rapid customs clearance possible for Common Effective Preferential Tax (CEPT). Secondly, members make the unified standard and consistent system; they applied international standard and quality management system. About 20 products, mainly electrical equipments, have met the requirements of 59 related international standards. Seven unified standards and regulation of makeup technology have been formulated and put into effect. Public technical standard of medicine have been established and enacted as well. Mutual Recognition Agreements (MRAs) can reduce the repetitive detection and certification so reduce trade time and cost.
　　Due to the trade facilitation measures taken by ASEAN, China has become the biggest trade partner of ASEAN for three years. Till the first half year of 2012, ASEAN has invested 4.55 billion dollars in China with yearly growth rate of 27.5%. Direct investments in China from ASEAN also increase and reach 73.8 billion dollars till the end of June of 2012, which accounts for 6% of China’s total foreign investment. China’s border cities Yunnan and Guangxi take full use of their advantages and benefit much from trade facilitation.
　　The trade between Yunnan and ASEAN countries has a long history and Yunnan has been the frontier in trade between China and southeastern and south Asia. The China-ASEAN free trade area and Great Mekong Sub-region (GMS) economic corridor give Yunnan favorable developing opportunity. In the past before Kun-Man (Kunming-Bangkok) highroad was built, Yunnan exported vegetable and fresh-cut flower through coastal ports, the vegetable and flower producing companies had to turn to intermediate companies, thus most part of profits went to the intermediate companies. However, with Kun-Man highroad built in 2008, Yunnan vegetable and flower can be directly shipped to ASEAN; producers can get the most profits. Yunnan also exports non-ferrous metal, electrical and agricultural products and electricity and imports woods, tropical fruits, seafood and handwork from ASEAN in turn with low or no customs duties. As it is, bilateral trade and investments between Yunnan and ASEAN increase greatly.
　　Generally Yunnan has benefited much from trade facilitation. For instance, in the past it took 7-8 days to ship the fresh cut flower from Kunming to Bangkok, but now after the construction of Kun-Man highroad, it takes only three days. The transportation cost is also reduced from RMB 7 yuan to RMB 3 yuan. These are all due to high efficiency of customs, the standardized and unified inspection and quarantine and convenient transportation.
　　Yunnan electrical port system was put into work in June of 2009, members can share information among different regions, sectors and industries, and thus customs clearance becomes more convenient and faster. Customs clearance can be completed within thirty seconds at national key electrical port Red River port, but in the past it took about ten minutes, therefore the trade flow of goods is amplified by 4-6 times. Import and export costs are both reduced and this improves trade greatly.
　　Pingxiang of Guangxi Province has become one of the largest fruits imports and exports distribution center. Logistic park of China-ASEAN free trade area was built in Pingxiang. Pingxiang Integrated Free Trade Zone (bonded area) has also been put into work in 2011. Customs clearance is becoming more convenient.
　　Theoretically, trade facilitation may promote trade growth. Sun Lin and Xu Xufei (2011) measures trade facilitation from port efficiency, customs environment, regulation and e-commerce. The results show that Chinese trade facilitation level is near world average, but among ASEAN countries there are big gap. Singapore is much higher than average, and Malaysia, Thailand and Brunei are also near world average. Vietnam and Indonesia are lower than average. They also build gravity model to test the impacts of trade facilitation on trade. The results show since ASEAN Free Trade Zone was built in 2010, trade facilitation has significant effects on trade. Air transportation is closely and positively related with manufacture product export. A 1% improvement of air transportation infrastructure causes increase in manufacture product export by1.48%. But the improvements of customs procedure and trade barriers are not significant. Finally authors simulate the results of different air transportation infrastructure construction, when the construction in all ASEAN members reaches its average level (5.2), Chinese manufacture product export to ASEAN will increase by 4.733 billion USD and with the growth rate of 39.34%. When ASEAN air transportation infrastructure construction reaches the highest in ASEAN, the export of Chinese manufacture product to ASEAN would increase by 70.95%.
　　As it is, those with high trade facilitation level have higher trade with China. As Table 4 shows, from 2005 to 2010, Singapore, Malaysia and Thailand had been China’s most important trade partners with 57, 74.2 and 52.9 billion respectively. However, in 2010 trade of Cambodia, Laos and Brunei with China are 1.4, 1.03 and 1.08 billion respectively; the trade facilitation levels of these countries are also low.
4.2 Impacts of Chinese Trade Facilitation on ASEAN Trade
　　China promises that General Administration of customs will improve trade facilitation with ASEAN from the following three aspects: firstly, to strengthen cooperation and communication, promote unified customs supervision, and help each other with law enforcement, information exchange and so on. Secondly, to build strategic cooperative partnership with ASEAN, related governments and business associations. Thirdly, to pay attention to proposals on trade facilitation in WTO negotiations and to promote trade facilitation actively.
　　At present, different measures have been actively taken in Chinese customs to promote the convenient customs clearance for ASEAN goods. As one of the main import port of ASEAN goods, Shenzhen customs carries out the automatic clearance system. After the implementation of the system, clearance time for vehicle import is reduced from about two minutes to 4-5 seconds, the efficiency is raised by more than 20 times.
　　In 2010 the customs of Pingxiang Port, Dongxing Port of Guangxi autonomous zone took online one-station clearance service, implemented preferential and convenient measures for import and export, and carried out round-the-clock, no-holiday service and 24-hour application system, which greatly reduces the transaction costs and improve the development of trade between Guangxi and the ASEAN countries.
　　Benefited from formal cooperation of China-ASEAN Free Trade Area and implementation of China-ASEAN trade facilitation measures, in 2011 ASEAN became China's third largest trade partner and third largest source of imports. The bilateral trade between China and the ASEAN reached 362.85 billion USD. Compared with the decrease, zero growth or low growth of Chinese trade with other countries, the bilateral trade between China and ASEAN maintain the growth of 9.2 %. From January to June 2012, China-ASEAN bilateral trade amounted to 187.82 billion USD, with the yearly growth rate of 9.8%, which is higher than the total foreign trade growth of China. Bilateral investment between China and ASEAN accumulated nearly 93 billion USD. China’s investment in ASEAN maintained rapid growth, and ASEAN has become an important destination of overseas investment of Chinese enterprises. The major pattern of economic and trade cooperation in China-ASEAN Free Trade Area are changing, such as the shift from the rapid growth of bilateral trade to bilateral investment and from passive to positive investment.
　　In recent years, trade surplus of ASEAN countries to China increase significantly. As shown in Table 5, in 2001 Malaysia's trade surplus with China amounted to 2.98 billion USD and it keeps increasing year after year and reached 26.64 billion USD in 2010, increasing by 792.63%. Thailand's trade surplus with China in 2001 was 2.37 billion USD but it reached 13.45 billion USD in 2010, increasing by 466.4%. Philippine's trade surplus with China was USD 320 million in 2001 and reached 4.68 billion USD in 2010, increasing by 14.4 times during the past10 years.
　　In addition to the above countries, trades between the rest ASEAN countries and China also increase greatly. According to the Thai Bureau of Statistics, since R3 highway was put into use, fruits export of Thai to China has increased by 100%, and trade value reaches over 722 million baht. Since April 2011, the value of Thai fruits which was exported through R3 road line to China increases by 100%.
　　R3 highway links Chiang Rai Port of Thailand – Boten Port of Laos -Mohan Port of Yunnan Province of China, its length is 1,104 km. The open of the R3 road line reduces the transport time to 2-3 days, the fresh fruits are distributed directly through the Yunnan market to southwest China, it is more convenient compared with former distribution channel through Guangzhou market. The data of Myanmar's Statistical Bureau shows that from 2011 to 2012 Myanmar-China trade volume reached 5.001 billion USD, of which Myanmar's imports from China is 2.786 billion and exports to China 2.214 billion, and China has become Burma's largest trade partner. There are currently 215 investment projects in Myanmar. Among them 14 projects are by Chinese investors that was around 13.87 billion and ranks at top one. According to customs statistics of Vietnam, the exports of Vietnam to China were 6.1 billion USD during the first half of the year. The main export commodities are as follows: 110 million USD for aquatic products, 90 million USD for fruits and vegetables, 120 million USD for cashew nut, 576 million USD for natural rubber, 3.56 million USD for wood and wood products, 459 million USD for rice, and 700 million USD for cassava and its products.
　　In the first half of 2012, the Chinese investment in ASEAN is 1.488 billion USD, increasing by 34.3%. As of the end of June 2012, Chinese investment in ASEAN reached 18.8 billion USD, new capital investment from china in ASEAN since 2008 accounted for more than 70% of its total. The field of Chinese investment in ASEAN has been extended to the construction, hotel, electrical, mining and transportation industries. At the same time, ASEAN investment in China has been expanding unceasingly.
　　On July 12, 2012, the East Asia Summit of Foreign Minister was held in Cambodia's capital Phnom Penh, Minister of Chinese Foreign Ministry Yang Jiechi addressed: "transportation and communication are focus of Chinese government to improve cooperation between China and ASEAN, and China will establish the Fund for China ASEAN Investment Cooperation, the overall scale will reach 10 billion USD to support ASEAN's infrastructure construction."
　　The investment projects include transportation, information and communication technology etc. In July 2011, the ASEAN Fund completed the equity investment in Thailand's largest port of Laem Chabang. In March the same year and June 2012, the ASEAN Fund invests Cambodia Optical Fiber Communication Network to help the development of a national fiber-optic network and related business in Indo-China Peninsula. In December 2010, the first investment of ASEAN Fund is to buy Philippines’ largest and second largest shipping companies.
　　The cooperation between China and ASEAN is comprehensive, which involved not only the field of trade, investment and technology cooperation, but also finance, culture, aviation, tourism, telecommunications, transportation, shipping and environmental protection, all these also achieved remarkable progress.
　　The above analysis shows that international cooperation and trade facilitation measures between China and ASEAN countries promote foreign investment, trade and economic development.



5. Impacts of trade facilitation on poverty
5.1 Impacts of trade facilitation on trade
　　From the above it can be seen that trade facilitation can improve greatly, the other related research also show this. Sun Zongying (2009) measures the trade facilitation levels of 52 countries and tests the impacts of major trade facilitation measures on trade, the results show that port efficiency4 has significant positive impacts on trade of neither import country or export country, and the elasticity are similar. For import country the elasticity of port efficiency on trade is 1.07 percent, but for the export country it is 1.02 percent, which means that 1 percent increase in port efficiency causes 1.07 percent increase in trade for import country and 1.02 percent for export country.
　　Follow import efficiency the impacts of customs efficiency on trade ranks at the second. But the impacts of regulations, rules and e-commerce are different from port and customs efficiency. The effects of regulation and e-commerce on import is negative, the elasticities are respectively -0.36 percent and -0.47 percent; for export they are positive, the elasticities are 0.54 percent and 2.16 percent. Generally the elasticities of regulation improvement and e-commerce development level on net export are respectively 0.9 percent and 2.63 percent.
　　In terms of China and ASEAN countries, Sun Lin and Xu Xuxia (2011) also build gravity model to study the effects of trade facilitation on trade after the CAFTA (China–ASEAN FTA) was built in 2010, it shows that trade facilitation has significant positive effects on trade. One percent improvement of air transportation infrastructure causes 1.48 percent increase in manufacture product export of ASEAN countries.
　　The analysis on Guang Xi, Yunnan and Shenzhen practices in above part of this report shows that trade facilitation can improve trade greatly.
5.2 Impact of trade on poverty
　　Funded by International Poverty Reduction Center in China, in 2010we finished a research project“Trade liberalization and poverty reduction- the case study on China and ASEAN countries”. In the research we studied the impacts of trade on poverty in detail.
　　Based on the methods of Shenggen Fan (2002), we incorporate trade into the model to build a system and study the contribution of trade to poverty reduction by using provincial panel-data in China from 2000 to 2008. The other factors affecting rural poverty reduction are also analyzed in the models.
　　The effects of agricultural imports on poverty. From the national perspective, elasticity of agricultural imports on poverty reduction is negative, which indicates that an increase in agricultural imports would worsen rural poverty in China. The elasticity of agricultural imports on poverty reduction is -0.05 (table 6), that is, if agricultural imports increases by 1%, the rural poverty index in China will increase by 0.05%.
　　From the regional perspective, the marginal effects of agricultural imports on rural poverty from high to low are: central, east and west. A large part of rural incomes in the central regions are from agriculture, therefore farmers in the central regions are affected by agricultural imports greatly.

Table 2 The elasticity of agricultural import on poverty reduction



　　The effects of agricultural exports on poverty. Nationally the elasticity of agricultural exports on poverty reduction is 1.03 (table 7), which indicates that the increase in agricultural exports has a positive effect on the alleviation of rural poverty in China, that is, if agricultural exports increase by 1%, then China's rural poverty index will decrease by 1.03%; agricultural output elasticity of agricultural exports is also positive, the increase of agricultural exports also raises farmer’s income, so that farmers increase their agricultural production.

Table 3 The elasticity of agricultural export on poverty reduction



　　From the regional perspective, the marginal effects of agricultural exports on rural poverty from high to low are: central, west and east. Agricultural exports have the greatest impacts on rural poverty reduction in the central region. The main reason is that a large part of rural income in the central region is from agriculture.
　　When putting agricultural imports and exports together, elasticity of net agricultural exports on poverty reduction is still positive, which indicates agricultural trade can help to reduce rural poverty in China; trade liberalization has positive effects on rural poverty reduction in China.
5.3 Impacts of trade facilitation on poverty: case study on manufacture industry and port efficiency
　　Impacts of trade facilitation on poverty reduction can be derived based on “trade facilitation on trade”and “trade on poverty”. But due to the difficulty in measuring trade facilitation, especially for the customs procedure, regulation and e-commerce, here we will mainly do case study on port efficiency, and use the results of manufacture industry to
　　analyze the impacts of port improvement on poverty reduction.
　　Sun Zongying (2009) tests the elasticity of port efficiency on trade5, here we use this result and the results on elasticity of trade on poverty to calculate the elasticity of port efficiency on poverty reduction (table 8).

Table 4 elasticity of port on poverty



Note： Due to lack of data, the elasticity of port on poverty reduction in table is simply multiplied by “Elasticity of port on trade”and“Elasticity of trade on poverty reduction”.

　　The results show that 1 percent increase in port efficiency causes 1.051percent decrease of poverty index. For the middle area, the elasticity reaches 2.116 percent; it is smaller for eastern or western area. The major reason is: (1)in the eastern area the poverty problem is basically solved, the marginal contribution of trade facilitation is small;(2)In the western region, it’s mainly mountainous area, transportation is not developed and its connection with international market is not as close as eastern or middle areas, the contribution of trade in its economic growth is not so high as the other areas, therefore the effect of trade on poverty reduction is small.
6. Conclusions and ecommendations
　　In summary, through China and ASEAN have made great progress in trade facilitation, including port infrastructure construction, customs procedure reform, e-commerce development, as well as laws and regulations environment, the level of trade facilitation is still low compared with other developed countries, and it is uneven in ASEAN countries. So, China should learn from the experience of countries with a high degree of trade facilitation, enhance international cooperation to prompt trade facilitation and the development of national economy.
6.1 Impacts of trade facilitation on poverty reduction
　　It is easy to understand the mechanism of impacts of trade facilitation on poverty reduction, but the real case is much complicated than the theory, so it is much difficult to measure trade facilitation completely. This is mainly due to the dynamics and complexity of trade facilitation, the complexity of reasons of poverty and the complexity of impact channels between them.
　　Therefore this research takes port construction as a case study, to examine the impacts of port construction on poverty reduction. The results show that 1 percent increase in port efficiency causes1.051 percent decrease of poverty index. For the middle area, the elasticity reaches 2.116 percent. It is smaller for eastern or western area. This is mainly because that in the eastern area the poverty problem is basically solved, the marginal contribution of trade facilitation is small, but in the mountainous western region, transportation is not developed and its connection with international market is not as close as eastern or middle areas, the contribution of trade in economic growth is not so high.
6.2 Enhancing capacity building in trade facilitation
6.2.1 To promote the reform of the customs further
　　In the global supply chain, customs clearance is the most important part. The burdensome and inefficient customs clearance measures, poor infrastructure cause high cost, and it’s easy to cause corruption. Therefore, the reform of customs procedures and internationalization of the customs rules will be conducive to the development of trade facilitation. Some developing countries think that the costs of customs reform and modernization are too high and there are technical difficulties,however, Chile and Singapore’s experiences show that the cost can be controlled, and investment on
trade facilitation is likely to get a quick return.
6.2.2 To strengthen infrastructure construction for trade and investment facilitation
　　Construction of hardware infrastructure is an important component of trade and investment facilitation. In the China - ASEAN countries, only Singapore and Malaysia's port infrastructures reach the world advanced level, but the port facilities in China and other countries are not so high or below the world average level. Therefore China and ASEAN countries must focus on investment in infrastructure, especially ports, airports and other infrastructures, establish transportation system which is compatible with economic development. Meanwhile, we must strengthen exchanges and cooperation between customs and develop customs system which can meet international standards.
6.2.3 To improve development of e-business
　　The development of e-commerce in ASEAN countries is uneven. These countries should endeavor to enhance their informationization level, and attach great importance to the development of electronic commerce to promote its application in trade facilitation. Firstly, the vigorous development of the network and further investment in the network infrastructure should be given higher priority. At the same time, the e-commerce related laws and regulations should be improved.
6.2.4 To improve the institutional environment
　　Firstly, the policy transparency should be improved further and policy should be kept stable and continuous. On the one hand, the administrative department of trade and investment should increase the transparency of trade and investment policies. The laws and regulations about trade and investment should be published in official publications or on the government website; it can not be executed before publishing. On the other hand, the approval procedures should be simplified, standardized. The law enforcement should also be enhanced. Finally, the coordination mechanism of trade and investment facilitation should be established. The related administrative departments should continue to expand the dialogue and communication with foreign companies, build a set of the new management model so as to achieve "win-win".
6.3 To enhance coordination between China and ASEAN in trade and investment facilitation
6.3.1 To promote unified standards

　　To adopt international standard is the most simple and effective way of the trade facilitation within China-ASEAN countries. With the fast development of economic integration in China - ASEAN Free Trade Area, the unified standards play increasingly important role in the promotion of international trade and the establishment of a technical trade measures. China and ASEAN countries should try to make their own domestic standards based on international standards, and try to adopt international standards in priority areas. Try to unify the regulations and procedures. Trade agreements, domestic laws and regulations related to international standards should be consistent within China-ASEAN area.
6.3.2 To establish trade facilitation committee in all countries of China-ASEAN area
　　Trade facilitation involves wide areas and multi-sectors. Each country should establish the institute to coordinate the different sectors. On the other hand, fast and effective coordination mechanism among different countries should also be enhanced. First of all, each country should achieve information sharing within its country, establish the central database of trade facilitation and ensure data updated so as to provide complete and accurate information. Secondly, each country should form the effective decision-making and information communication mechanism at the government level. Finally, each country should establish a consultative mechanism with foreign trade enterprises, know about the issue and impact of trade facilitation, and solve the problems in trade facilitation timely.
　　Generally each of China-ASEAN should pay more attention to the initiative of the establishment of the National Trade Facilitation Committee in Doha Round negotiations, cooperate to promote the development of trade facilitation, improve the China-ASEAN cooperation level, strengthen trade and investment cooperation partnership and promote the extensive development of trade facilitation jointly.

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