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

World Bank Policy Research Working Paper No. 4960

41 Pages Posted: 21 Aug 2014

See all articles by Hector F. Calvo Pardo

Hector F. Calvo Pardo

University of Southampton - Economics Division

Caroline L. Freund

World Bank - Macro, Trade and Investment

Emanuel Ornelas

Sao Paulo School of Economics

Date Written: June 1, 2009

Abstract

Using detailed data on trade and tariffs from 1992-2007, the authors examine how the ASEAN Free Trade Agreement has affected trade with nonmembers and external tariffs facing nonmembers. First, the paper examines the effect of preferential and external tariff reduction on import growth from ASEAN insiders and outsiders across HS 6-digit industries. The analysis finds no evidence that preferential liberalization has led to lower import growth from nonmembers. Second, it examines the relationship between preferential tariff reduction and MFN tariff reduction. The analysis finds that preferential liberalization tends to precede external tariff liberalization. To examine whether this tariff complementarity is a result of simultaneous decision making, the authors use the scheduled future preferential tariff reductions (agreed to in 1992) as instruments for actual preferential tariff changes after the Asia crisis. The results remain unchanged, suggesting that there is a causal relationship between preferential and MFN tariff reduction. The findings also indicate that external liberalization was relatively sharper in the products where preferences are likely to be most damaging, proving further support for a causal effect. Overall, the results imply that the ASEAN agreement has been a force for broader liberalization.

Keywords: Free Trade, Trade Policy, Trade Law, Trade and Regional Integration, International Trade and Trade Rules

JEL Classification: F13, F15

Suggested Citation

Calvo Pardo, Hector F. and Freund, Caroline L. and Ornelas, Emanuel, The ASEAN Free Trade Agreement: Impact on Trade Flows and External Trade Barriers (June 1, 2009). World Bank Policy Research Working Paper No. 4960 , Available at SSRN: https://ssrn.com/abstract=2483814 or http://dx.doi.org/10.2139/ssrn.2483814

Hector F. Calvo Pardo

University of Southampton - Economics Division ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom
+442380595051 (Phone)
+442380593858 (Fax)

Caroline L. Freund

World Bank - Macro, Trade and Investment ( email )

1818 H Street, N.W.
MC3-329
Washington, DC 20433
United States
(202)458-0847 (Phone)

HOME PAGE: http://econ.worldbank.org/staff/cfreund

Emanuel Ornelas (Contact Author)

Sao Paulo School of Economics ( email )

Rua Itapeva 474 s.1202
São Paulo, São Paulo 01332-000
Brazil

HOME PAGE: http://https://sites.google.com/site/emanuelornelaseo/

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