IDEAS home Printed from https://ideas.repec.org/a/kap/iecepo/v17y2020i3d10.1007_s10368-020-00471-5.html
   My bibliography  Save this article

ASEAN and the EU: an assessment of interregional trade potentials

Author

Listed:
  • Evelyn S. Devadason

    (University of Malaya)

  • Shujaat Mubarik

    (Mohammad Ali Jinnah University)

Abstract

Though negotiations on an Association of Southeast Asian Nations – European Union (ASEAN-EU) trade agreement began in 2007, the region-wide agreement stalled, and the EU has since pursued bilateral agreements with individual ASEAN member states (AMS). Nevertheless, the goal to form an interregional agreement remains as the European Commission and the AMS are currently undertaking a stocktaking exercise to explore the prospects towards the resumption of region-to-region negotiations. In this paper, a stochastic frontier specification of the gravity model is employed to identify and compare the performance (efficiency) of exports relative to the maximum export levels for the ASEAN-EU partnership. The findings, based on a panel dataset of two-way bilateral exports between the ASEAN-10 and the EU-28 over the 2000–2016 period, indicate a low-level of export efficiency. The low efficiency scores of below 0.2 suggest a high degree of trade resistances in the ASEAN-EU partnership. The low interregional trade potentials relate to market access issues, which in turn depend on the trade policy of both regions.

Suggested Citation

  • Evelyn S. Devadason & Shujaat Mubarik, 2020. "ASEAN and the EU: an assessment of interregional trade potentials," International Economics and Economic Policy, Springer, vol. 17(3), pages 705-726, July.
  • Handle: RePEc:kap:iecepo:v:17:y:2020:i:3:d:10.1007_s10368-020-00471-5
    DOI: 10.1007/s10368-020-00471-5
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10368-020-00471-5
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1007/s10368-020-00471-5?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Geetha Ravishankar & Marie M. Stack, 2014. "The Gravity Model and Trade Efficiency: A Stochastic Frontier Analysis of Eastern European Countries' Potential Trade," The World Economy, Wiley Blackwell, vol. 37(5), pages 690-704, May.
    2. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    3. Marianne Baxter & Michael A. Kouparitsas, 2005. "What determines bilateral trade flows?," Working Paper Series WP-05-11, Federal Reserve Bank of Chicago.
    4. Alan V. Deardorff, 2011. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," World Scientific Book Chapters, in: Robert M Stern (ed.), Comparative Advantage, Growth, And The Gains From Trade And Globalization A Festschrift in Honor of Alan V Deardorff, chapter 24, pages 267-293, World Scientific Publishing Co. Pte. Ltd..
    5. Jon Haveman & David Hummels, 2004. "Alternative hypotheses and the volume of trade: the gravity equation and the extent of specialization," Canadian Journal of Economics, Canadian Economics Association, vol. 37(1), pages 199-218, February.
    6. Shiro Armstrong, 2007. "Measuring Trade and Trade Potential: A Survey," Asia Pacific Economic Papers 368, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
    7. Botezatu, Elena, 2007. "EU – ASEAN free trade area: regional cooperation for global competitiveness," MPRA Paper 4946, University Library of Munich, Germany.
    8. Debeare, Peter, 2003. "Relative Factor Abundance and Trade," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 589-610, June.
    9. A Salim, Ruhul & Kabir, Shahriar, 2011. "Parallel Integration and ASEAN-EU Trade Potential: an Empirical Analysis," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 26, pages 601-623.
    10. Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March.
    11. Meeusen, Wim & van den Broeck, Julien, 1977. "Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 435-444, June.
    12. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
    13. Simon J. Evenett & Wolfgang Keller, 2002. "On Theories Explaining the Success of the Gravity Equation," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 281-316, April.
    14. Peter Egger, 2002. "An Econometric View on the Estimation of Gravity Models and the Calculation of Trade Potentials," The World Economy, Wiley Blackwell, vol. 25(2), pages 297-312, February.
    15. Celine Carrere & Jaime de Melo & Bolormaa Tumurchudur, 2008. "Disentangling Market Access Effects for ASEAN Members under an ASEAN-EU FTA," Development Working Papers 259, Centro Studi Luca d'Agliano, University of Milano.
    16. Chengang Wang & Yingqi Wei & Xiaming Liu, 2010. "Determinants of Bilateral Trade Flows in OECD Countries: Evidence from Gravity Panel Data Models," The World Economy, Wiley Blackwell, vol. 33(7), pages 894-915, July.
    17. Nilsson, Lars, 2000. "Trade integration and the EU economic membership criteria," European Journal of Political Economy, Elsevier, vol. 16(4), pages 807-827, November.
    18. Baier, Scott L. & Bergstrand, Jeffrey H., 2009. "Bonus vetus OLS: A simple method for approximating international trade-cost effects using the gravity equation," Journal of International Economics, Elsevier, vol. 77(1), pages 77-85, February.
    19. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-481, August.
    20. Bergstrand, Jeffrey H, 1989. "The Generalized Gravity Equation, Monopolistic Competition, and the Factor-Proportions Theory in International Trade," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 143-153, February.
    21. Baltagi, Badi H. & Egger, Peter & Pfaffermayr, Michael, 2003. "A generalized design for bilateral trade flow models," Economics Letters, Elsevier, vol. 80(3), pages 391-397, September.
    22. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
    23. Battese, George E. & Coelli, Tim J., 1988. "Prediction of firm-level technical efficiencies with a generalized frontier production function and panel data," Journal of Econometrics, Elsevier, vol. 38(3), pages 387-399, July.
    24. Kalirajan, K.P., 2000. "Indian Ocean Rim Association for Regional Cooperation (IOR-ARC): Impact on Australia’s Trade," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 15, pages 533-547.
    25. Plummer, Michael G., 2006. "ASEAN-EU economic relationship: Integration and lessons for the ASEAN economic community," Journal of Asian Economics, Elsevier, vol. 17(3), pages 427-447, June.
    26. Lancaster, Kelvin, 1980. "Intra-industry trade under perfect monopolistic competition," Journal of International Economics, Elsevier, vol. 10(2), pages 151-175, May.
    27. Peter Egger & Michael Pfaffermayr, 2003. "The proper panel econometric specification of the gravity equation: A three-way model with bilateral interaction effects," Empirical Economics, Springer, vol. 28(3), pages 571-580, July.
    28. Helpman, Elhanan, 1981. "International trade in the presence of product differentiation, economies of scale and monopolistic competition : A Chamberlin-Heckscher-Ohlin approach," Journal of International Economics, Elsevier, vol. 11(3), pages 305-340, August.
    29. Elena Botezatu, 2007. "EU – ASEAN FTA: regional cooperation for global competitiveness," Romanian Economic Business Review, Romanian-American University, vol. 2(2), pages 35-44, June.
    30. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    31. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-116, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. S C A El Maaly, 2022. "What the Analysis of 136 Studies from 1960 to 2020 Tells Us About Comparative Regionalism Studies," Economic Issues Journal Articles, Economic Issues, vol. 27(2), pages 31-85, September.
    2. Vasilii Erokhin & Gao Tianming & Anna Ivolga, 2021. "Cross-Country Potentials and Advantages in Trade in Fish and Seafood Products in the RCEP Member States," Sustainability, MDPI, vol. 13(7), pages 1-40, March.
    3. Amadeo Navarro Zapata & María Arrazola & José Hevia, 2023. "Technological intensity in manufacturing trade between ASEAN and the EU: challenges and opportunities," Asia Europe Journal, Springer, vol. 21(1), pages 23-42, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Simone Juhasz Silva & Douglas Nelson, 2012. "Does Aid Cause Trade? Evidence from an Asymmetric Gravity Model," The World Economy, Wiley Blackwell, vol. 35(5), pages 545-577, May.
    2. Shumilov, Andrei, 2016. "Особенности Оценивания Гравитационных Моделей Международной Торговли [Estimating Gravity Models of International Trade: A Survey]," MPRA Paper 75371, University Library of Munich, Germany.
    3. Shumilov, Andrei, 2017. "Оценивание Гравитационных Моделей Международной Торговли: Обзор Основных Подходов [Estimating gravity models of international trade: a survey of methods]," MPRA Paper 79790, University Library of Munich, Germany.
    4. Tamaş Anca, 2020. "Why should the gravity model be taught in business education?," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 14(1), pages 422-433, July.
    5. Kareem, Fatima Olanike & Martinez-Zarzoso, Inmaculada & Brümmer, Bernhard, 2016. "Fitting the Gravity Model when Zero Trade Flows are Frequent: a Comparison of Estimation Techniques using Africa's Trade Data," GlobalFood Discussion Papers 230588, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    6. Paas, Tiiu, 2002. "Gravity approach for exploring Baltic Sea regional integration in the field of international trade," HWWA Discussion Papers 180, Hamburg Institute of International Economics (HWWA).
    7. Sushil Kumar & Shahid Ahmed, 2015. "Gravity Model by Panel Data Approach," Foreign Trade Review, , vol. 50(4), pages 233-249, November.
    8. Ian M. Sheldon, 2021. "Reflections on a Career as an Industrial Organization and International Economist," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(2), pages 468-499, June.
    9. Petra Bubáková, 2013. "Gravity Model of International Trade, Its Variables, Assumptions, Problems and Applications [Gravitační model mezinárodní směny, jeho proměnné, předpoklady, problémy a aplikace]," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2013(2), pages 3-24.
    10. Güzin Bayar, 2018. "Estimating export equations: a survey of the literature," Empirical Economics, Springer, vol. 54(2), pages 629-672, March.
    11. Chengang Wang & Yingqi Wei & Xiaming Liu, 2010. "Determinants of Bilateral Trade Flows in OECD Countries: Evidence from Gravity Panel Data Models," The World Economy, Wiley Blackwell, vol. 33(7), pages 894-915, July.
    12. Kandogan, Yener, 2009. "A Gravity Model for Components of Imports," Review of Applied Economics, Lincoln University, Department of Financial and Business Systems, vol. 5(1-2), pages 1-17, April.
    13. Dennis Novy, 2013. "Gravity Redux: Measuring International Trade Costs With Panel Data," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 101-121, January.
    14. 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.
    15. Zhang, Daowei & Li, Yanshu, 2009. "Forest endowment, logging restrictions, and China's wood products trade," China Economic Review, Elsevier, vol. 20(1), pages 46-53, March.
    16. Shiro Armstrong, 2007. "Measuring Trade and Trade Potential: A Survey," Asia Pacific Economic Papers 368, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
    17. Muhammad Ullah & Kazuo Inaba, 2012. "Impact of RTA and PTA on Bangladesh’s Export: Application of a Gravity Model," Journal of Industry, Competition and Trade, Springer, vol. 12(4), pages 445-460, December.
    18. Estrella Gómez-Herrera, 2013. "Comparing alternative methods to estimate gravity models of bilateral trade," Empirical Economics, Springer, vol. 44(3), pages 1087-1111, June.
    19. Sally Milton & M A B Siddique, 2014. "Trade Creation and Diversion Under the Thailand-Australia Free Trade Agreement (TAFTA)," Economics Discussion / Working Papers 14-26, The University of Western Australia, Department of Economics.
    20. Paas, Tiiu, 2002. "Gravity Approach for Exploring Baltic Sea Regional Integration in the Field of International Trade," Discussion Paper Series 26379, Hamburg Institute of International Economics.

    More about this item

    Keywords

    Augmented gravity model; Stochastic frontier analysis; Interregional exports; Association of Southeast Asian Nations; European Union;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:iecepo:v:17:y:2020:i:3:d:10.1007_s10368-020-00471-5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.