Possible dynamic effects of ASEAN/AFTA accession for the new member countries

Fukase, Emiko and Winters, L Alan (2003) Possible dynamic effects of ASEAN/AFTA accession for the new member countries. World Economy, 26 (6). pp. 853-872. ISSN 0378-5920

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We discuss the possible dynamic benefits of economic integration for the new members of ASEAN. Direct evidence on regional integration and growth is weak, but three indirect channels are possible. Openness increases access to foreign knowledge, which could help productivity growth. Trade liberalisation is likely to stimulate investment and might promote the integration of the regional production network. Binding liberalisation under AFTA would help `lock-in¿ and accelerate liberal economic reforms. These gains are not automatic, however. Discriminatory liberalisation will switch imports from sources with high stocks of knowledge towards ASEAN countries, which have lower stocks, and so may lower productivity growth. We term this `dynamic¿ trade diversion. In addition, local absorptive capabilities must be developed to benefit fully from technology transfer. Finally, we recommend extending AFTA commitments on an MFN basis in order to avoid static and dynamic trade diversions.

Item Type: Article
Schools and Departments: University of Sussex Business School > Economics
Depositing User: L.Alan Winters
Date Deposited: 06 Feb 2012 19:43
Last Modified: 05 Jul 2012 15:00
URI: http://sro.sussex.ac.uk/id/eprint/21895
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