Is a regional trade bloc a prelude to multilateral trade liberalization?: Empirical evidence from the ASEAN-5 economies

Abstract

Are regional trade blocs precursors to multilateral trade liberalization? This study examines the issue by drawing from a sample of five ASEAN countries (hereafter the ASEAN-5: Malaysia, Indonesia, the Philippines, Singapore and Thailand). For this purpose, terms of trade for regional and multilateral trade liberalization for the countries in question are computed over the period 1967–2000 to determine whether these countries are moving towards regional or international terms of trade. We utilized an array of time series methods to establish the long run relationship between the two terms of trade. The major findings are: first, the ASEAN-5 is moving towards multilateral trade liberalization. Second, membership in regional trade blocs contributes to the advancement of multilateral trade liberalization. Together, these findings suggest that trade policies initiated in the ASEAN countries are the beginning of the formation of free trade since regional trade liberalization appears not to hinder the global integration process in the region.