Impact of FTA on Trade in ASEAN and Australia Using Customs Level Data

Thangavelu, Shandre M.; Narjoko, Dionisius; Urata, Shujiro

doi:2021.36.3.437

The Journal of Economic Integration 2021 September;36(3) :437-461.
DOI: https://doi.org/10.11130/jei.2021.36.3.437

Impact of FTA on Trade in ASEAN and Australia Using Customs Level Data

Shandre M. Thangavelu, ^1,2 Dionisius Narjoko, ³ Shujiro Urata, ⁴

^1,2Sunway University, Malaysia
University of Adelaide, Australia
³Economic Research Institute for ASEAN and East Asia
⁴Waseda University, Japan

Corresponding Author: Shandre M. Thangavelu ,Email: Shandrethangavelu@gmail.com

ABSTRACT

This study examines the impact of the Association of Southeast Asian Nations (ASEAN)-Australia-New Zealand Free Trade Agreement (AANZFTA) on Australian trade with a particular focus on imports from ASEAN member countries to Australia. We examine the AANZFTA’s utilization by ten ASEAN countries at the six-digit trade classification level from 2012 to 2016 using Australian customs data. We implement Ando and Urata’s (2018) and Hayakawa et al.’s (2014) framework of free trade agreement (FTA) utilization based on preferential tariff margins. We also account for overlapping FTAs that are likely to impact the AANZFTA’s utilization. The results indicate that preferential tariff margins positively impact FTA utilization. However, the results also indicate that the AANZFTA’s utilization rate across ASEAN countries is low relative to Australia’s bilateral FTAs with Malaysia, Thailand, and Singapore. We also find evidence that co-sharing rules of origin positively impact FTA utilization.

JEL Classification

F13: Trade Policy; International Trade Organizations
F15: Economic Integration
F53: International Agreements and Observance; International Organizations

Keywords: preferential tariffs | trade liberalization | preference erosion