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Assessment the Effect of Free Trade Agreements on Exports of Lao PDR

Author

Listed:
  • Bounlert Vanhnalat

    (Faculty of Economics and Business Management, National University of Laos, Laos,)

  • Phouphet Kyophilavong

    (Faculty of Economics and Business Management, National University of Laos, Laos,)

  • Alay Phonvisay

    (Faculty of Economics and Business Management, National University of Laos, Laos,)

  • Bouason Sengsourivong

    (Faculty of Economics and Business Management, National University of Laos, Laos.)

Abstract

This research paper focuses on estimating the impact of free trade agreements (FTAs) between Lao PDR and 32 trading partners. The panel gravity model has been applied over the period of 1996-2011. The overall findings indicate that the preferential utilization is relatively low and is highly concentrated in natural resource products. Since most exporters have difficulty complying with the various local content requirements, the information of preferential utilization is limited, lack of export diversification and the quality of goods cannot meet the standard requirements. The results of the gravity model suggest that a reduction of import tariffs based on World Trade Organization commitment has strongly supported trade creation, while several FTAs made with major trading partners are a vital factor to support export growth. The findings suggest Lao's exports under preferences and generalized system of preferences (GSP) treatment would increase trade volume on average by 50% more than those partners who neither have FTAs nor GSP.

Suggested Citation

  • Bounlert Vanhnalat & Phouphet Kyophilavong & Alay Phonvisay & Bouason Sengsourivong, 2015. "Assessment the Effect of Free Trade Agreements on Exports of Lao PDR," International Journal of Economics and Financial Issues, Econjournals, vol. 5(2), pages 365-376.
    • Handle: RePEc:eco:journ1:2015-02-06
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    References listed on IDEAS

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    1. Kimberly A. Clausing, 2001. "Trade creation and trade diversion in the Canada - United States Free Trade Agreement," Canadian Journal of Economics, Canadian Economics Association, vol. 34(3), pages 677-696, August.
    2. Robert J. R. Elliott & Kengo Ikemoto, 2004. "AFTA and the Asian Crisis: Help or Hindrance to ASEAN Intra‐Regional Trade?," Asian Economic Journal, East Asian Economic Association, vol. 18(1), pages 1-23, March.
    3. Robinson, Sherman & Thierfelder, Karen, 2002. "Trade liberalisation and regional integration: the search for large numbers," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 46(4), pages 1-20.
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    5. Xuepeng Liu, 2009. "GATT/WTO Promotes Trade Strongly: Sample Selection and Model Specification," Review of International Economics, Wiley Blackwell, vol. 17(3), pages 428-446, August.
    6. Masahiro Endoh, 1999. "Trade creation and trade diversion in the EEC, the LAFTA and the CMEA: 1960-1994," Applied Economics, Taylor & Francis Journals, vol. 31(2), pages 207-216.
    7. Baier, Scott L. & Bergstrand, Jeffrey H., 2007. "Do free trade agreements actually increase members' international trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 72-95, March.
    8. Indira M. Hapsari & Carlos Mangunsong, 2006. "Determinants of AFTA Members’ Trade Flows and Potential for Trade Diversion," Working Papers 2106, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
    9. Baier, Scott L. & Bergstrand, Jeffrey H., 2001. "The growth of world trade: tariffs, transport costs, and income similarity," Journal of International Economics, Elsevier, vol. 53(1), pages 1-27, February.
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    Citations

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    Cited by:

    1. Salucknai Outtanasith & Khaysy Srithilat, 2022. "The Impact of AFTA on Trade Openness, and Foreign Direct Investment: The Empirical Evidence from Lao PDR," International Journal of Science and Business, IJSAB International, vol. 16(1), pages 142-152.
    2. Phouphet Kyophilavong & Kazunobu Hayakawa, 2024. "Impacts of Trade Liberalization in the Least Developed Countries: Evidence From Lao PDR," The Developing Economies, Institute of Developing Economies, vol. 62(1), pages 45-67, March.
    3. My Duong & Mark J. Holmes & Anna Strutt & Steven Lim, 2019. "Effects of Trade Agreements and Foreign Direct Investment on Trade: Evidence from Vietnam," International Journal of Economics and Financial Issues, Econjournals, vol. 9(3), pages 116-126.
    4. Margarita Navarro-Pabsdorf & Eduardo Cuenca-Garcia & Estela Quiros-Gonzalez, 2024. "The Impact of Foreign Trade in the Graduation Process of Asian Least-Developed Countries (LDCs)," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 13745-13779, September.
    5. Sinthavanh Chanthavong, 2024. "Quantifying the impact of trade liberalization on Lao imports (evidence from product-level data)," International Journal of Economic Policy Studies, Springer, vol. 18(2), pages 455-474, August.

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    More about this item

    Keywords

    World Trade Organization; Trade Creation; Gravity Model;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration

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