Integration, Trade pattern and Intra-Industry Trade in ASEAN

Abstract This thesis examines the impact that AFTA has had on intra-industry trade in different commodity groups and the ASEAN member countries during the years 1993-2002. The frequently used Grubel-Llyod index is employed to estimate the degree of intra-industry trade in this cross-country study, and dynamic effects from integration are evaluated by studies of growth rates in trade and intra-industry trade. Hypotheses are obtained from factors expected to increase the degree of intra-industry trade. The factors are: economies of scale and product differentiation, higher per capita income and similarity in per capita income, larger economic size and similarity in economic size and open trade policy, while intra-industry trade measures economic integration within ASEAN in comparison to intra-industry trade with the World. The trade data generally supports the hypotheses, but the intra-industry trade flows indicate that the positive impact from integration within ASEAN is found to be only marginal.