Trade creation and export diversion: Thailand’s plastic and rubber under the ASEAN-China free trade agreement

Abstract

This study aims to investigate the impact of the ASEAN-China free trade agreement on plastic and rubber trading, focusing on trade creation and export diversion. The collected data include 11 intra-bloc countries and 23 extra-bloc countries from 1990 to 2021, analyzed using STATA17. The gravity model is applied to the international trade framework. First, the unit root test is used to confirm the stationary nature of the data. Then, the methods are compared, employing fixed effects and a robust Poisson maximum likelihood estimator. The bilateral dummy variables are used to estimate the directional impact of trade agreements on export volume. The result demonstrates that the ASEAN-China free trade agreement establishes trade creation and export diversion. It has had a positive impact on the export value of plastic and rubber in Thailand over the past 30 years, but in terms of trade creation is less than export diversion. This means that exporting plastic and rubber to extra-bloc countries will gain more benefits than trading with member countries under the ASEAN-China free trade agreement. However, trading under the ASEAN-China free trade agreement may continue, but export volumes of plastic and rubber will decline. According to the findings, it can be suggested that Thailand’s government has to have a comparative advantage in product and strong competitiveness. Meanwhile, the ASEAN-China free trade agreement should not only focus on trade tariffs but also improve customs clearance to reduce trade costs. AcknowledgmentI would also like to extend my thanks to my parents for their support and encouragement throughout my studies.