Implications of ASEAN economic integration on services: a global computable general equilibrium analysis

The launch of the ASEAN Economic Community (AEC) in 2015 was an auspicious step for economic growth within the region. However, the challenge is to ensure that growth is inclusive and prosperity is shared. Despite the goal of establishing the AEC by 2015, slow progress has been made in removing nontariff barriers to trade and achieving integration of services. In the past decade, the services sector accounted for more than 50% of GDP growth in most economies in ASEAN. The services trade remains highly concentrated, with Singapore, Malaysia, and Thailand accounting for 82% of ASEAN’s services exports. ASEAN has signed a number of services trade agreements with the People’s Republic of China (PRC), Japan, and the Republic of Korea (ROK). ASEAN and India have signed an Agreement on Investment and Trade in Services very recently. However, a major impediment to the liberalization of trade in services is the lack of rigorous analytical work on its potential impact. Against this background, the objective of the study is to evaluate the economy-wide implications of services trade liberalization in the year 2030 using the global computable general equilibrium (CGE) framework. It evaluates these implications within ASEAN; between ASEAN and Japan, ASEAN and the ROK, ASEAN and the PRC and ASEAN and India; and between ASEAN and Japan–the PRC–the ROK as a group. Further, it seeks to investigate the implications of services trade liberalization in ASEAN on the growth of skilled and unskilled labor in various scenarios. The findings show that the progress in the services sector is likely to bring enormous economic gain to ASEAN economies, although not distributed equally across the member nations.