ASEAN or plus alpha? The effectiveness of regional economic cooperation

Abstract

This study examines the effectiveness of regional trading blocs in Southeast Asia utilizing the gravity model of international trade. The primary objective of this study is to determine which trading bloc – ASEAN, ASEAN3 or ASEAN6 – is most effective in creating preferential trading arrangements. We examine a comprehensive panel data for a sample of ASEAN's 10-member state countries spanning bilateral trade with 29 major trading partners over 17 years. The results reveal that the export volume of ASEAN member countries to AEAN6 member countries is 2.5 to 4 times higher than to non-member countries, thus indicating that ASEAN6 is the optimal group. In the latter portions of this paper, this paper provides policy implications to create effective and efficient trading arrangements.

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