DID THE ASEAN-CHINA FREE TRADE AREA (ACFTA) ACTUALLY INCREASE ASEAN COUNTRIES' EXPORTS TO CHINA?

Abstract

The ACFTA officially started in the year 2010, even though tariff reductions began as early as mid-2005. I use gravity-type equations adapted from the existing literature alongside OLS and PPML estimators in order to estimate ACFTA effects on bilateral trade between ASEAN and China, after controlling for the relevant country-time and country-pair fixed effects. I find that the ACFTA is associated with a negative and significant effect on bilateral trade flows between ASEAN and China at the intensive margin of trade, but is associated with no significant ACFTA effect after taking into account the extensive margin of trade. After separating the estimation of ACFTA effects by country pairs and product groups, I observe heterogeneity in the ACFTA effects. In particular, I find that the aggregate trade performance of some ASEAN countries following the ACFTA was worse relative to the others, with half of them experiencing negative ACFTA effects.