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Assessing the trade impacts of the ASEAN+6 FTA : the case of Lao People’s Democratic Republic

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Using an unbalanced panel dataset of bilateral exports from 1992 to 2009, this paper assesses the potential trade impacts of the expansion of the Association of Southeast Asian Nations (ASEAN) to ASEAN+3 and ASEAN+6 on the Lao People’s Democratic Republic (Lao PDR). It finds that bilateral exports are positively related to the overall bilateral country size and similarity in country size, but inversely related to the relative factor endowment differences, transportation costs, and import tariffs. Simulation results show that the formation of free trade agreement (FTA) between ASEAN and the Plus-6 economies (the People’s Republic of China, Japan, and the Republic of Korea in East Asia; and the other three economies of Australia, India, and New Zealand) can increase bilateral trade between the Lao PDR and ASEAN+6 by $1 billion, and ASEAN+3 by $981 million. Nonetheless, trade balance of the Lao PDR is likely to worsen in both the ASEAN+3 and ASEAN+6 FTAs because they stimulate more imports than exports.

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  • Suvannaphakdy, Sithanonxay & Tang, Hsiao Chink & DiCaprio, Alisa, 2014. "Assessing the trade impacts of the ASEAN+6 FTA : the case of Lao People’s Democratic Republic," Working Papers on Regional Economic Integration 126, Asian Development Bank.
    • Handle: RePEc:ris:adbrei:0126
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    More about this item

    Keywords

    East Asia; trade flow; gravity model; Lao PDR;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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