Assessing the Impact of ASEAN+3 Free Trade Agreements on ASEAN’s Trade Flows: A Gravity Model Approach1

Nguyen Anh Thu,Le Thi Thanh Xuan,Vu Van Trung

doi:10.5901/mjss.2015.v6n6p394

Nguyen Anh Thu, Le Thi Thanh Xuan + Show 1 more

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https://doi.org/10.5901/mjss.2015.v6n6p394

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Abstract

This paper employs the gravity model with panel data to examine the impact of ASEAN+3 free trade agreements on ASEAN’s trade flows in the period 2000 – 2013. Estimated results indicate that GDP, GDP per capita, incomegap and distance play a crucial role in bilateral trade among ASEAN members and ASEAN trade volumes with the rest of the world. Additionally, the results reveal that AFTA creates positive and significant trade-creation effects due to tariff eliminations. AFTA has been successful in promoting the bilateral trade not only among ASEAN countries but also between intra-bloc and extra-bloc countries. Conversely, ACFTA, AJCEP negatively affects intra-ASEAN trade and ASEAN’s exports to the rest of the world. Meanwhile, ASEAN’s imports from the rest of the world are negatively affected by ACFTA and AJCEP. Finally, AKFTA causes trade-diversion effect in terms of exports from member countries to non-member countries of AKFTA. AKFTA can be a positive factor in promoting exports among its members. DOI: 10.5901/mjss.2015.v6n6p394

Highlights

Over the last decades, trade liberalization has become an inevitable trend, which is evidenced by the growing number of free trade agreements (FTA) under different regional and global framework
In the light of significant progress in Association of South East Asian Nations (ASEAN) trade liberalization, this paper examines the specific effects of ASEAN+3 FTAs including ASEAN Free Trade Agreement (AFTA) and FTAs between ASEAN and China, the republic of Korea, Japan
The results showed that ASEAN – China Free Trade Agreement (ACFTA) and ASEAN – Korea Free Trade Agreement (AKFTA) had not yet favored East Asia’s trade flows

Summary

Introduction

Trade liberalization has become an inevitable trend, which is evidenced by the growing number of free trade agreements (FTA) under different regional and global framework. It is the establishment of World Trade Organization (WTO) with the involvement of 161 members that provides a convincing explanation for the benefits of opening markets with all those concerned. East Asian is not an exception to the global trend of regional economic integration, characterized by the rapid expansion of international production and distribution networks within the region and the establishment of a number of FTAs. Being considered as one of the most dynamic regions in the world, East Asian has proved itself that trade liberalization has made significant contributions to the economic growth for all members. The establishment of those FTAs is the fundamental step towards strengthening economic and trade cooperation among the 13 economies, accounting for more than one-fifths of world GDP4

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