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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.

Suggested Citation

  • Hector Calvo-Pardo & Caroline Freund & Emanuel Ornelas, 2009. "The ASEAN Free Trade Agreement: Impact on Trade Flows and External Trade Barriers," CEP Discussion Papers dp0930, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0930
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    More about this item

    Keywords

    regionalism; external tariffs; trade liberalization; preferential trade agreements; Asia;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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    This paper has been announced in the following NEP Reports:

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