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

Hector Calvo-Pardo, Caroline Freund () and Emanuel Ornelas
Authors registered in the RePEc Author Service: Hector Fernando Calvo Pardo ()

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: Using detailed data on trade and tariffs from 1992-2007, we examine how the ASEAN Free TradeAgreement has affected trade with non-members and external tariffs facing non-members. First, weexamine the effect of preferential and external tariff reduction on import growth from ASEANinsiders and outsiders across HS 6-digit industries. We find no evidence that preferential liberalizationhas led to lower import growth from non-members. Second, we examine the relationship betweenpreferential tariff reduction and MFN tariff reduction. We find that preferential liberalization tends toprecede external tariff liberalization. To examine whether this tariff complementarity is a result ofsimultaneous decision making, we use the scheduled future preferential tariff reductions (agreed to in1992) as instruments for actual preferential tariff changes after the Asia crisis. The results remainunchanged, suggesting that there is a causal relationship between preferential and MFN tariffreduction. We also find that external liberalization was relatively sharper in the products wherepreferences are likely to be most damaging, proving further support for a causal effect. Overall, ourresults imply that the ASEAN agreement has been a force for broader liberalization.

Keywords: regionalism; external tariffs; trade liberalization; preferential trade agreements; Asia (search for similar items in EconPapers)
JEL-codes: F13 F15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-sea
Date: 2009-05
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Working Paper: The ASEAN free trade agreement: impact on trade flows and external trade barriers (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:cep:cepdps:dp0930

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