An Investigation on the Effectiveness and Trade Direction of ASEAN Trade Agreements

This study aims to evaluate the effectiveness of the ASEAN regional trade agreement by comparing the growth rates of intra-ASEAN trade with those of the rest of the world as well as with major trading countries, China, the USA, the EU, and India. The objective of this research is threefold: To identify existing trade trends, to determine the underlying explanations for these trends, and finally, to compare intra-ASEAN trade trends with the inter-ASEAN countries’ trade trends. This paper takes a descriptive approach and dynamic panel GMM methods spanning the years 1990 to 2019. Between 2005 and 2019, growth rates among members of intra-ASEAN, Indonesia-Malaysia, Indonesia-Thailand, Singapore-Thailand, Malaysia-Philippines, and Philippines-Thailand, all decreased. Additionally, although the market share of imports and exports within ASEAN has decreased over time, the market share of imports and exports of inter-ASEAN has increased, especially with China and India. The results of descriptive analysis of inter-ASEAN trade openness are supported by first-differenced GMM and system GMM. This is the first study to examine historical intra-ASEAN trade trends and growth and compare them to inter-ASEAN trade trends and growth to determine whether AFTA has a greater impact on intra-ASEAN trade growth than on inter-ASEAN trade growth using updated aggregated data. This study sheds light on the fact that over the periods intra-ASEAN trade could not outperform inter-ASEAN trade by a significant margin due to trade diversity challenges and incomplete implementation of WTO regulations.