Trade Creation and the Status of FTAs: Empirical Evidence from East Asia
Review of World Economics, Vol. 147, No. 3, pp. 429-456
Posted: 14 Nov 2011
Date Written: November 13, 2011
East Asia has been considered a latecomer with respect to Free Trade Agreements (FTAs). Since the turn of the last century, however, FTAs with East Asian participation have seen an intra- and extra-regional expansion. Many trade initiatives have been proposed, negotiated or even implemented. This introduces interesting perspectives for the analysis of trade agreements regarding their anticipatory trade effects. This paper focuses on the trade impact of FTAs at different stages that East Asian economies participate in. The central part of this study is an econometric analysis that applies panel data to the gravity model of international trade flows. We augment the traditional model with variables to estimate trade effects of bilateral and multilateral agreements and year-to-year changes in the stages of their implementation. Our results reveal that there exist anticipatory effects preceding the actual implementation of bilateral FTAs with East Asian participation. Further, anticipation effects are larger for bilateral than for multilateral agreements, possibly because the realisation of bilateral agreements is considered more realistic.
Keywords: Free Trade Agreements, Trade, East Asia, Gravity model, Panel data
JEL Classification: F13
Suggested Citation: Suggested Citation