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The Impact of ACFTA on People’s Republic of China–ASEAN Trade: Estimates Based on an Extended Gravity Model for Component Trade

Yu Sheng (), Hsiao Chink Tang () and Xinpeng Xu ()
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Hsiao Chink Tang: Asian Development Bank, Postal: 6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines, http://www.adb.org

No 99, Working Papers on Regional Economic Integration from Asian Development Bank

Abstract: This paper uses an extended gravity model to shed light on the impact of the free trade area agreement between the Association of Southeast Asian Nations (ASEAN) and the People's Republic of China (PRC) on the members' trade flows and trade patterns. New determinants that capture the rising importance of global production sharing and intraregional trade in parts and components in East Asia are proposed. Results from the extended gravity model show that the free trade agreement leads to substantially higher bilateral trade between ASEAN and the PRC, more than what a conventional gravity model predicts. The increase is concentrated in the ASEAN countries with stronger industrial linkages with the PRC.

Keywords: ACFTA; gravity model; parts and components trade (search for similar items in EconPapers)
JEL-codes: F17 O53 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2012-07-01
New Economics Papers: this item is included in nep-int and nep-sea
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