Trade Creation and Trade Diversion Effects of the ASEAN-China FTA, ASEAN-Korea FTA, and ASEAN-India FTA Implementation on the Export of Indonesia’s Food and Beverages Industry Products

Abstract

This research is aimed at analyzing the effect of trade creation and trade diversion which occurs on the establishment of such cooperation for the export of Indonesian food and beverage industry products with trading partners with either its members’ or non-members’ cooperation. This research is conducted by using a test from 12 countries in the period of 2005–2015 estimated using a modified gravity model by increasing the variable on dummy FTA as a proxy from the impact on the implementation of ACFTA, AKFTA, and AIFTA. The estimate results of this research suggest that the implementation of ACFTA, AKFTA, and AIFTA provides positive and significant effect of trade creation and trade diversion on export of Indonesian food and beverage products. This signifies that the implementation of ACFTA, AKFTA, and AIFTA creates a trade creation effect by increasing intra-regional trade between ACFTA, AKFTA, and AIFTA member countries and can’t cause trade diversion with non-member countries.