ASEAN: economic integration and intra-regional trade
- Subhash C. Sharma and Soo Y. Chua
At the summit meeting of the Association of Southeast Asian Nations (ASEAN) in January 1992, leaders from the six countries of ASEAN agreed to form the ASEAN Free Trade Area (AFTA). ASEAN consists of Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand. At the summit in September 1994, the plan was accelerated and ASEAN countries will be an FTA by the year 2003. On the other hand, equally important was the establishment of the Asia Pacific Economic Cooperation (APEC) in 1989. ASEAN was considered to be a subset of the large APEC. But, the ASEAN countries would benefit by participating in wider economic cooperation …show more content…
Hamilton and Winters studied the regional grouping of small countries and found that ASEAN shows a strong bias toward intra-regional trade. However, most of the further studies concluded that ASEAN does not show a strong trend toward intra-regional trade in Southeast Asia, except for an APEC grouping which includes East Asia, Australia, New Zealand, Canada and the United States.
In this paper, the authors plan to analyze the impact of the APEC on the integration of ASEAN countries. The data used for this study is from 1980-1985 and the model used for the research is the gravity model. The data has not been pooled across countries; instead the authors estimated a single equation for each of the five countries in ASEAN. The gravity model has been estimated for the entire sample period and also at intervals of at least five years so as to average out any cyclical effect that might be present in the bilateral trade data.
The gravity model relates the bilateral trade flow between two countries to their Gross National Products (GNPs), Y and the distance between them, D. The model is written as …show more content…
For the independent variables, the GDPs for both countries are entered as product form to take into account the size of the economy. PGDP is the GDP per capita and it is also entered in the product form. The coefficients for GDP and PGDP (α1 and α2) are expected to have a positive sign. Dij is the distance between two country ports in nautical miles. This provides a good proxy for the transportation cost, and the coefficient of Dij is expected to be negatively related to the trade flows. Finally, ASEAN and APEC are dummy variables representing a preferential trading arrangement. A value of one is assigned if both trading partners are from the same arrangement and zero if they are
- Subhash C. Sharma and Soo Y. Chua
At the summit meeting of the Association of Southeast Asian Nations (ASEAN) in January 1992, leaders from the six countries of ASEAN agreed to form the ASEAN Free Trade Area (AFTA). ASEAN consists of Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand. At the summit in September 1994, the plan was accelerated and ASEAN countries will be an FTA by the year 2003. On the other hand, equally important was the establishment of the Asia Pacific Economic Cooperation (APEC) in 1989. ASEAN was considered to be a subset of the large APEC. But, the ASEAN countries would benefit by participating in wider economic cooperation …show more content…
Hamilton and Winters studied the regional grouping of small countries and found that ASEAN shows a strong bias toward intra-regional trade. However, most of the further studies concluded that ASEAN does not show a strong trend toward intra-regional trade in Southeast Asia, except for an APEC grouping which includes East Asia, Australia, New Zealand, Canada and the United States.
In this paper, the authors plan to analyze the impact of the APEC on the integration of ASEAN countries. The data used for this study is from 1980-1985 and the model used for the research is the gravity model. The data has not been pooled across countries; instead the authors estimated a single equation for each of the five countries in ASEAN. The gravity model has been estimated for the entire sample period and also at intervals of at least five years so as to average out any cyclical effect that might be present in the bilateral trade data.
The gravity model relates the bilateral trade flow between two countries to their Gross National Products (GNPs), Y and the distance between them, D. The model is written as …show more content…
For the independent variables, the GDPs for both countries are entered as product form to take into account the size of the economy. PGDP is the GDP per capita and it is also entered in the product form. The coefficients for GDP and PGDP (α1 and α2) are expected to have a positive sign. Dij is the distance between two country ports in nautical miles. This provides a good proxy for the transportation cost, and the coefficient of Dij is expected to be negatively related to the trade flows. Finally, ASEAN and APEC are dummy variables representing a preferential trading arrangement. A value of one is assigned if both trading partners are from the same arrangement and zero if they are