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

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