The Impact of ASEAN Free Trade Agreement on ASEAN Members’ Export

Regional trade agreements have covered more than half of international trade throughout the world since in the beginning 1990’s. The ASEAN Free Trade Area (AFTA) was established to improve regional economic competitiveness. Encouraging export has been one of the main priorities within the opening-up to international trade as the driving force for economic growth. In the aftermath of the global financial crisis, it is important for the member countries to enhance international trade relations through free trade agreements to improve regional production systems. Free trade agreements enhance the trade of goods efficiently sourced between member countries and lead to trade creation that improves welfare. In order to analyze the impact of AFTA on member countries’ export performance, this paper develops a basic gravity model to perform cross sectional data analysis involving sixty countries, both members and nonmembers of AFTA, for the periods of 1991, 2001, and 2012. The main finding of this study is that after AFTA came into force, there was a positive effect on the member countries’ export performance.