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Intra-Industry Trade and the ASEAN Free Trade Area

Author

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  • Jayant Menon

Abstract

The decision to establish the ASEAN Free Trade Area (AFTA) by the year 2005 has resulted in producers in all ASEAN countries except Singapore raising concerns relating to potential loss of market share and adjustment pressures. Underlying these concerns is the view that the expected growth in intra-ASEAN trade will be dominated by inter-industry or net trade rather than intra-industry trade. If most of the expected growth in trade is intra-industry, however, then the short-run resource re-allocation costs are likely to be low. This study employs a new methodology to analyse the dynamics of intra-industry trade in ASEAN. Problems associated with using movements in the value of the Grubel–Lloyd (GL) index are overcome by deriving a formula that decomposes the growth in trade into the contributions of growth in intra-industry and net trade. The results suggest that the role of intraindustry trade in trade growth has been increasing in importance, and thus much of the recent concern that threatens the viability of AFTA may be misplaced.

Suggested Citation

  • Jayant Menon, 1996. "Intra-Industry Trade and the ASEAN Free Trade Area," Asia Pacific Economic Papers 251, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:csg:ajrcau:251
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    File URL: https://crawford.anu.edu.au/pdf/pep/pep-251.pdf
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    Cited by:

    1. Sunandan Ghosh, 2019. "Enlargement Decisions of Regional Trading Blocs with Asymmetric Members," Working Papers id:12992, eSocialSciences.
    2. Chemsripong, S. & Lee, J.E. & Agbola, F.W., 2005. "Intra-Industry Trade in Manufactures Between Thailand and Other Asia Pacific Economic Cooperation (APEC), Countries," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 5(4).
    3. Ruhul Salim & Amirul Islam & Harry Bloch, 2018. "Patterns And Determinants Of Intra-Industry Trade In Southeast Asia: Evidence From The Automotive And Electrical Appliances Sectors," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 63(03), pages 647-665, June.
    4. Sujinda Chemsripong & Frank W. Agbola & Julie E. Lee, 2009. "Regional Integration And Intra-Industry Trade In Manufactures Between Thailand And Other Apec Countries," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 54(01), pages 135-148.

    More about this item

    JEL classification:

    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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