Evaluating the Impact of a Canada-ASEAN FTA

Abstract

This study an analysis of the trade and economic implications of a Canada-ASEAN free trade agreement (FTA) using a dynamic computable general equilibrium model. The level of ambition is calibrated to be consistent with ASEAN’s most ambitious FTA to date, namely that with Australia and New Zealand (AANZFTA). The assessment takes into account tariff reductions and impacts on non-tariff barriers to goods trade, services trade and investment based on changes to the parties’ trade-related measures as captured by the OECD’s Trade Facilitation Indicators (for goods), Services Trade Restrictiveness Index, and Foreign Direct Investment Restrictiveness Index. We find a positive but modest impact on bilateral trade with consequent modest welfare and real GDP gains. Factoring in the reduction of uncertainty that the FTA would have in a climate of rising uncertainty about access to traditional markets, and the current under-performance of bilateral Canada-ASEAN trade compared to expectations based on economic geography, the reported trade gains and the economic gains they leverage could be substantially higher.

Keywords: Canada, ASEAN, FTA, CGE

JEL Classification: F13, F15