Comparing the Effects of CAFTA on Internal Trade of China and ASEAN Countries

This paper compares the effects of CAFTA on internal trade of China and ASEAN Countries. ASEAN countries are analyzed individually, by developing two gravity models and using the panel data of 7 samples countries and areas from 2002 to 2010. The empirical result shows that GDP, distance, exchange rate, population and policy framework of CAFTA are trade determinant factors for China and ASEAN countries. The effects of CAFTA implementation in this study can be divided in four categories. Firstly, positive and significant effect. Singapore and Malaysia are gaining this effect. Secondly, positive effect but not significant, China and Thailand are gaining this effect. Thirdly, negative but not significant. Indonesia is having negative but not significant effect. Fourthly, negative and significant. Philippines is having this effect. Negative effect is happened to Indonesia and Philippines, not significant for Indonesia, but significant for Philippines. These two countries are getting less compare to other ASEAN countries. The rank of ASEAN countries that receive the greatest effect of CAFTA to the smallest one, that is: Singapore, Malaysia, Thailand, Indonesia and the last Philippines and this result is similar with the rank of countries Total Factor Productivity (TFP) growth rate.