Impact of Regional Trade Agreements in East Asia on Members’ Trade Flows

Using an unbalanced panel dataset of bilateral trade flows, we study the determinants of two-way trade for Australia, China, India, Japan, New Zealand, Korea and the ten ASEAN countries from 1990 to 2009. We find that bilateral trade flow is positively related to the sum of the GDP of trading countries, and similarity in GDP size, but inversely related to relative factor endowment differences, transportation costs and import tariffs. Our empirical results suggest that formulating an East Asian Free Trade Area is important for promoting intraregional trade. Furthermore, there is a need to provide a range of instruments to assist least-developed ASEAN countries in designing and implementing appropriate trade integration policies through the provision of technical and financial assistance as well as analytical support.