Trade potential between ASEAN countries and Taiwan

Abstract

This study takes ASEAN (Association of Southeast Asian Nations) as a case study to measure their trade potential with a maximum level of trade defined by a stochastic frontier approach. A stochastic frontier gravity model with a ‘real-random effect’ is adopted to examine the issues highlighted. This study sheds light on ASEAN countries’ trade performance with that of Taiwan by comparing the findings with those for ASEAN’s other trading counterparts. The empirical results show that the trading efficiency between ASEAN and Taiwan is substantially superior to that for ASEAN and its other trading partners. Accordingly, there needs an innovative way to explore the trade potentials between ASEAN and Taiwan. The study further investigates the popular application of ICT in facilitating ASEAN countries’ international trade. As substantiated by empirical evidence, improving ICT readiness in these ASEAN countries is a key factor in enabling them to exploit their trade potential with Intra- and extra- ASEAN. ASEAN countries have significantly lagged behind their trading partners outside the bloc in terms of networked-readiness. From Taiwan’s viewpoint, the New Southbound Policy has devoted many efforts to linking up ASEAN and Taiwan in multiple areas of its economy and society. International cooperation in terms of ICT application can effectively improve the linkages between ASEAN and Taiwan for further exploiting untapped trade potential.