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

Author

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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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    References listed on IDEAS

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    1. Antoni Estevadeordal & Caroline Freund & Emanuel Ornelas, 2008. "Does Regionalism Affect Trade Liberalization Toward Nonmembers?," The Quarterly Journal of Economics, Oxford University Press, vol. 123(4), pages 1531-1575.
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    Citations

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    Cited by:

    1. Xuepeng Liu & Emanuel Ornelas, 2014. "Free Trade Agreements and the Consolidation of Democracy," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(2), pages 29-70, April.
    2. Crivelli, Pramila, 2016. "Regionalism and falling external protection in high and low tariff members," Journal of International Economics, Elsevier, vol. 102(C), pages 70-84.
    3. Fugazza, Marco & Nicita, Alessandro, 2011. "Measuring preferential market access," MPRA Paper 38565, University Library of Munich, Germany.
    4. Marco Fugazza & Alessandro Nicita, 2011. "On The Importance Of Market Access For Trade," UNCTAD Blue Series Papers 50, United Nations Conference on Trade and Development.
    5. Baldwin, Richard, 2010. "Unilateral tariff liberalisation," CEPR Discussion Papers 8162, C.E.P.R. Discussion Papers.
    6. Jin, Seung Ha, 2013. "The Effect of South Korean FTAs on Trade: Country-level and Industry-level Analyses," Master's Theses 149430, University of Minnesota, Department of Applied Economics.
    7. Ketterer, Tobias D. & Bernhofen, Daniel & Milner, Chris, 2014. "Preferences, rent destruction and multilateral liberalization: The building block effect of CUSFTA," Journal of International Economics, Elsevier, vol. 92(1), pages 63-77.
    8. Sila, Urban, 2009. "Can family-support policies help explain differences in working hours across countries?," LSE Research Online Documents on Economics 28684, London School of Economics and Political Science, LSE Library.
    9. repec:eaa:aeinde:v:17:y:2017:i:2_10 is not listed on IDEAS
    10. repec:gen:geneem:12071 is not listed on IDEAS
    11. Pierre-Louis Vézina, 2014. "Race-to-the-bottom Tariff Cutting," Review of International Economics, Wiley Blackwell, vol. 22(3), pages 444-458, August.
    12. Ahmed, Saira & Ahmed, Zafar & Sohail, Safder & Sarfraz, Irfan & Shafqat, Mohammad & Mamoon, Dawood & Saadia, Hissam, 2012. "Lessons Drawn From Pakistan-Sri Lanka FTA," MPRA Paper 81488, University Library of Munich, Germany.
    13. Sato, Hitoshi., 2014. "How can ASEAN and Japan mutually benefit from ASEAN economic integration?," ILO Working Papers 994863883402676, International Labour Organization.
    14. Maggi, Giovanni, 2014. "International Trade Agreements," Handbook of International Economics, Elsevier.
    15. Elshennawy, Abeer, 2013. "The Euro-Mediterranean free trade agreement and the cost of tariff liberalization in Egypt," Journal of Policy Modeling, Elsevier, vol. 35(2), pages 326-338.
    16. repec:ilo:ilowps:486388 is not listed on IDEAS
    17. 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.
    18. James J. Wang & Michael C.B. Cheng, 2015. "Mature hub ports in the free trade environment, the way forward from a global supply chain perspective: an Asian case," Maritime Policy & Management, Taylor & Francis Journals, vol. 42(5), pages 436-458, July.
    19. Fugazza, Marco & Nicita, Alessandro, 2013. "The direct and relative effects of preferential market access," Journal of International Economics, Elsevier, vol. 89(2), pages 357-368.

    More about this item

    Keywords

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

    JEL classification:

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

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