Trade creation and diversion effects of ASEAN-plus-one free trade agreements

This article examined the trade creation and diversion effects of ASEAN-plus-one free trade agreements (FTAs) by estimating the gravity trade model for the recent two decades between 1993 and 2013. The estimation applied the panel-data with fixed effects to clear the FTA-endogeneity problem. The empirics showed that the trade creation effect in ASEAN-China FTA (ACFTA) was much larger than those in ASEAN-Korea FTA (AKFTA) and ASEAN-Japan FTA (AJFTA), and that the trade diversion effects were commonly negative in ACFTA, AKFTA and AJFTA as expected. The larger trade creation effect in ACFTA might come from the wider gap between the general tariff rate and the preferential tariff rate for ASEAN in China.

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