The ASEAN–China Free Trade Area — A Success or a Failure? A Preliminary Evaluation Based on Econometric Evidence

Abstract

The ASEAN–China Free Trade Area (ACFTA) is the first of the free trade agreements signed by ASEAN with its major trade partners, and is generally considered a success. However, while liberalization of trade among ASEAN countries has historically not provoked any major issues, things went differently concerning the ACFTA, and complaints have been raised that the treaty allows China too many trade benefits. The purpose of this article is to evaluate, using trade gravity equations, if there is any evidence that the ACFTA has been responsible for the growing trade imbalance between China and Indonesia. The model has not produced any conclusive results about the negative effects on the ACFTA for Indonesia. Given the relevance of this treaty for the ongoing regional integration in Asia, however, the coming years will be crucial in determining the form of it among the existing options and the outcome now seems more uncertain than ever.