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

Sithanonxay Suvannaphakdy (), Hsiao Chink Tang () and Alisa DiCaprio ()
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Hsiao Chink Tang: Asian Development Bank, Postal: 6 ADB Avenue, Mandaluyong City, Philippines
Alisa DiCaprio: Asian Development Bank, Postal: 6 ADB Avenue, Mandaluyong City, Philippines

No 126, Working Papers on Regional Economic Integration from Asian Development Bank

Abstract: 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.

Keywords: East Asia; trade flow; gravity model; Lao PDR (search for similar items in EconPapers)
JEL-codes: C33 F14 F15 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2014-04-01
New Economics Papers: this item is included in nep-int and nep-sea
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