Lai KH, Pang Y, Wong CWY, Lun VYH (2015) The role of logistics in facilitating exchanges: lessons learned from ASEAN. Global Port Research Alliance Conference Paper. International trade includes trade in goods and services between countries that are beneficial to participating companies. Related theories such as Absolute Advantage (Smith 1776) and Comparative Advantage (Ricardo 1817) emphasize the importance of international trade in improving the efficient use of resources and, therefore, facilitating specialization in competitive fields. In international markets, the regional free trade agreement is a widespread means of economic integration (Krugman 2015). The main feature of the free trade agreement is that all Member States are required to remove tariffs on each other`s products, while maintaining their independence in organizing trade policies with non-members (Appleyard et al. 2001). Since free trade training involves different treatments for Member States as opposed to non-members, the result will be two possible consequences, namely the effect of the creation of trade and the effect of trade diversion (Viner 1950). The acquisition of trade is carried out when free trade training allows a Member State to import goods from another Member State which has a comparative advantage in the more efficient manufacture of goods. By way of comparison, trade diversion refers to the process of transferring import models from a profitable producer outside the free trade agreement to a producer less efficient in the free trade agreement, in order to benefit from zero or low tariffs. In other words, economic regionalism tends towards protectionist blocs (Lim 2009); this shift in trade flows will distort resource allocation and lead to inefficiencies (ship and winter 2003).
Wilson JS, Mann CL, Otsuki T (2004) Assessment of the potential benefit of trade facilitation: a global perspective. Working paper 3224. World Bank, Washington, D.C Wong CWY, Wong CY, Boon-itt S (2013) The combined effects of internal and external supply chain integration on product innovation. Int J Prod Econ 146:566-574 Portugal-Perez A, Wilson J (2012) Reform of Export Performance and Trade Facilitation: Hard and Soft Infrastructure. World Dev 40:1295-1307 Table 2 shows the regression results of Hypothesis 1. Model 1 presents our results on the simple log-liner relationship between intra-ASEAN trade and one-year arrears CEPT rates. The result shows that this negative correlation is statistically significant at the level of 0.01. In addition, our estimate achieves a high level of adjustment, given that both R2 and adjusted R2 are above 0.98, which means that internal tariffs between ASEAN member states will help explain intra-ASEAN trade.
Model 1a re-examines this relationship by integrating the two control variables, GDP per capita and CL, which also date back one year. It shows that the inclusion of control variables has a slight impact on the result of regression: the quality of the adaptation of the specifications is maintained, and the statistical significance of the key estimate reaches 0.015. Overall, the result of the estimate is robust and consistent with Hypothesis 1: as AFTA countries created the AFTA by reducing domestic tariffs, their trade between them tends to increase significantly. Gupta S, Goh M, Desouza R, Garg M (2011) Assessment of the business friendliness of logistics services in ASEAN. Asia Pac J Mark Logist 23:773-793 Limao N, Venables AJ (2001) Infrastructure, geographical handicap, transport, costs and trade. World Bank Econ Rev 15:451-479 Clark X, Dollar D, Micco A (2004) Port efficiency, shipping costs and bilateral trade. J Dev Econ 75:417-450 Data sets produced and/or analyzed under the current study are available at the ASEAN secretariat under asean.org/asean-economic-community/asean-free-trade-area-afta-council/other-documents/ and the International Monetary Fund`s trade statistics directorate under data.imf.org/?sk=9D6028D4-F14A-464C-A2F2-59B2CD424B85.