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The ASEAN Free Trade Agreement: Impact on Trade Flows and External Trade Barriers

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  • Hector Calvo-Pardo
  • Caroline Freund
  • Emanuel Ornelas

Abstract

Using detailed data on trade and tariffs from 1992-2007, we examine how the ASEAN Free Trade Agreement has affected trade with non-members and external tariffs facing non-members. First, we examine the effect of preferential and external tariff reduction on import growth from ASEAN insiders and outsiders across HS 6-digit industries. We find no evidence that preferential liberalization has led to lower import growth from non-members. Second, we examine the relationship between preferential tariff reduction and MFN tariff reduction. We find that preferential liberalization tends to precede external tariff liberalization. To examine whether this tariff complementarity is a result of simultaneous decision making, we use the scheduled future preferential tariff reductions (agreed to in 1992) as instruments for actual preferential tariff changes after the Asia crisis. The results remain unchanged, suggesting that there is a causal relationship between preferential and MFN tariff reduction. We also find that external liberalization was relatively sharper in the products where preferences are likely to be most damaging, proving further support for a causal effect. Overall, our results imply that the ASEAN agreement has been a force for broader liberalization.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0930.

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Date of creation: May 2009
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Handle: RePEc:cep:cepdps:dp0930

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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Keywords: regionalism; external tariffs; trade liberalization; preferential trade agreements; Asia;

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References

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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Trade agreements from the bottom-up
    by Pierre-Louis in Rigotnomics on 2009-09-09 17:51:00
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Cited by:
  1. Jin, Seung Ha, 2013. "The Effect of South Korean FTAs on Trade: Country-level and Industry-level Analyses," Master's Theses, University of Minnesota, Department of Applied Economics 149430, University of Minnesota, Department of Applied Economics.
  2. Tobias Ketterer & Daniel M. Bernhofen & Chris Milner, 2012. "Preferences, Rent Destruction and Multilateral Liberalisation: The Building Block Effect of CUSFTA," CESifo Working Paper Series 3985, CESifo Group Munich.
  3. Xuepeng Liu & Emanuel Ornelas, 2013. "Free Trade Aggreements and the Consolidation of Democracy," CEP Discussion Papers, Centre for Economic Performance, LSE dp1184, Centre for Economic Performance, LSE.
  4. Pierre-Louis Vézina, 2010. "Race-To-The-Bottom Tariff Cutting," IHEID Working Papers, Economics Section, The Graduate Institute of International Studies 12-2010, Economics Section, The Graduate Institute of International Studies, revised Jul 2010.
  5. Ahmed, Saira & Ahmed, Vaqar & Sohail, Safdar, 2010. "Trade agreements between developing countries: a case study of Pakistan - Sri Lanka free trade agreement," MPRA Paper 29209, University Library of Munich, Germany.
  6. Pramila Crivelli, 2012. "Regionalism and Falling External Protection in High and Low Tariff Members," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva, Institut d'Economie et Econométrie, Université de Genève 12071, Institut d'Economie et Econométrie, Université de Genève.
  7. Richard Baldwin, 2011. "Unilateral tariff liberalisation," Global COE Hi-Stat Discussion Paper Series, Institute of Economic Research, Hitotsubashi University gd10-159, Institute of Economic Research, Hitotsubashi University.
  8. Urban Sila, 2009. "Can family-support policies help explain differences in working hours across countries?," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 28684, London School of Economics and Political Science, LSE Library.
  9. Fugazza, Marco & Nicita, Alessandro, 2013. "The direct and relative effects of preferential market access," Journal of International Economics, Elsevier, Elsevier, vol. 89(2), pages 357-368.
  10. Marco Fugazza & Alessandro Nicita, 2011. "On The Importance Of Market Access For Trade," UNCTAD Blue Series Papers, United Nations Conference on Trade and Development 50, United Nations Conference on Trade and Development.
  11. Elshennawy, Abeer, 2013. "The Euro-Mediterranean free trade agreement and the cost of tariff liberalization in Egypt," Journal of Policy Modeling, Elsevier, Elsevier, vol. 35(2), pages 326-338.

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