The Potential Benefits of a Hypothetical ASEAN Free Trade Area

Abstract

The study makes an attempt to appraise the potential benefits for ASEAN moving towards closer economic co-operation through the formation of a Free Trade Area. Part I examines the recent trends in ASEAN intraregional trade structure. Part II assesses the static gains in terms of trade expansion due to tariffs elimination among the five ASEAN countries. Part III estimates the dynamic gains in terms of manufacturing output expansion as a result of the enlargement of the market. The conclusion reached is that the chance of success for an Asean Free Trade Area is likely to be rather slim because (1) the basis for such a form of economic co-operation in ASEAN is rather fragil; (2) the static gains will be rather insignificant; and (3) the potential dynamic gains may be considerable, but they are unlikely to materialize through the mere formation of a Free Trade Area.