Does the establishment of Pilot Free Trade Test Zones promote the transformation and upgradation of trade patterns?

As the main battleground for the high-quality development of trade, the establishment of Pilot Free Trade Zones (PFTZ) in China has been an important strategy to promote the transformation and upgrading of the quality and patterns of trade. Based on annual provincial-level panel data from 2002 to 2017, this study explores the impact of the establishment of PFTZ on the transformation and upgradation of trade patterns based on the multi-period difference-in-differences (DID) method and yields four significant findings. First, PFTZ have increased the share of general trade by 11.8%, whereas the share of processing trade has decreased by 14.1%, indicating that they have significantly contributed to the transformation and upgradation of domestic trade patterns. This finding holds after conducting various robustness tests. Second, from the perspective of heterogeneity, even though the impact of the first batch of the PFTZ was insignificant, the second batch has significantly promoted the transformation and upgradation of trade patterns. Third, the promotion effect of the establishment of the provincial PFTZ on the transformation of trade patterns was significantly higher than that of the PFTZ directly controlled by the central government. Finally, the study found that the Belt and Road Initiative (BRI) can enhance the positive effect of the PFTZ on the quality and development of trade.