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ASEAN in a Regional Perspective

  • Frankel, Jeffrey A.
  • Wei, Shang-Jin

Trade among the ASEAN economies is higher than one would expect, based on their income levels and other important determinants of bilateral trade. The same is true of trade within East Asia more broadly (or trade within an ASEAN-Australia-New Zealand grouping). To the extent that this regional concentration of trade is attributed to formal or informal regional trading arrangements, they appear to be trade-creating, not trade-diverting. The rate of increase of trade within ASEAN or within East Asia, however, can be entirely explained by the rapid growth of the countries. There is nothing left over to attribute to an intensifying bloc. Perhaps the regional concentration, which shows up from the beginning of the sample period, is not due to formal measures, such as the decision to form an ASEAN FrA, but rather to a shared trading culture. (Trade among Southeast Asian countries will in the future naturally continue to grow more rapidly than incomes.) The openness of the Indochinese countries, suitably adjusted, was very low in 1992, but had almost doubled by 1994. If these formerly autarkic countries restore normal trade relations with the rest of the world over the coming decade, the gravity model predicts that their trade will expand another seven-fold, in addition to the expansion attributable to growth. The stock of Foreign Direct Investment (FDI) is a significant determinant of trade. We find that bilateral FDI can be modelled analogously to bilateral trade. In both cases, there is no evidence that Japan has accelerated its economic interactions with Southeast Asia, beyond what can be attributed to simple economic growth rates. We accept others' arguments that the ASEAN countries' trade relations with the industrialized countries are more important than their relations with each other. But we do not accept the argument that the latter are unimportant. If the ASEAN countries make serious progress along the path that they have set for themselves under the AFTA, the

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Paper provided by Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley in its series Center for International and Development Economics Research, Working Paper Series with number qt7g38z09z.

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Date of creation: 01 Nov 1996
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Handle: RePEc:cdl:ciders:qt7g38z09z
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  1. Hiro Lee & David Roland-Holst, 1993. "International Trade and the Transfer of Environmental Costs and Benefits," OECD Development Centre Working Papers 91, OECD Publishing.
  2. Paul Krugman, 1995. "Growing World Trade: Causes and Consequences," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 327-377.
  3. Tom Jackson, 1991. "A game model of ASEAN trade liberalization," Open Economies Review, Springer, vol. 2(3), pages 237-254, October.
  4. Raymond Vernon, 1966. "International Investment and International Trade in the Product Cycle," The Quarterly Journal of Economics, Oxford University Press, vol. 80(2), pages 190-207.
  5. Kojima, Kiyoshi, 1985. "Japanese and American Direct Investment in Asia : A Comparative Analysis," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 26(1), pages 1-35, June.
  6. Arvind Panagariya, 1994. "East Asia and the New Regionalism in World Trade," The World Economy, Wiley Blackwell, vol. 17(6), pages 817-839, November.
  7. Frankel, Jeffrey A. (ed.), 1997. "The Regionalization of the World Economy," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226259956.
  8. Colin Kirkpatrick, 1994. "Regionalisation, Regionalism and East Asian Economic Cooperation," The World Economy, Wiley Blackwell, vol. 17(2), pages 191-202, 03.
  9. Jeffrey A. Frankel, 1997. "Regional Trading Blocs in the World Economic System," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 72.
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