Trade Integration in East Asia: An Empirical Assessment

This study employs a gravity model of bilateral trade flows at the one-digit level of the standard international trade classification (SITC) product categories over the period of 1996 to 2005 to provide an empirical assessment of regional trade integration in East Asia. The formation of the ASEAN free trade area agreement is found to have both positive and negative effects on trade both among members and between members and the rest of the world, subject to SITC product category. Although the differences between actual and predicted levels of intra-ASEAN trade and of trade between ASEAN and other East Asian countries have been reduced, there remain product categories indicating a low degree of trade integration. Those product categories include food and live animals, machinery and transport equipment, and miscellaneous manufactured articles. Finally, the level of intra-industry trade intensity based on predicted trade values confirms that ASEAN is involved in intra-industry trade among its members more than trade with other East Asian countries.