Trade Creation and Trade Diversion of ASEAN’s Preferential Trade Agreements

This paper analyzes the effects of ASEAN Preferential Trade Agreements (PTAs) and employs the gravity model over 2007-2011. The regressions include all 6 ASEAN PTAs in a single regression which is run separately. Our pool regression results show that ASEAN members trade with each other at a level higher than without preferential trade agreements. RCEP displays intra-bloc trade creation so as to ACFTA, AJCEP, and AIFTA. There have been stumbling-blocs in AANZFTA. Our results show that export trade diversion in AKFTA and most of the import extra-bloc trade dummies are not statistically significant. PTAs with higher external tariffs is likely to be associated with trade diversion. Also, the finding confirms that the results for the pooled regression and the results for individual regressions are different. Simultaneous estimation for all PTAs in a single regression enables us to avoid bias in the results by accounting for interactions among PTAs.