Evaluating Asian Free Trade Agreements: What Does Gravity Model Tell Us?

This paper evaluates the performance of Free Trade Agreements (FTAs) by analysing the determinants of trade flows of Asian economies for a panel of 31 countries during 2007–2014 using a Gravity model. The estimated results suggest that certain FTAs negatively contribute to trade flows across the region and, that GDP and population, among other factors, can explain total trade flows. This study also finds that trade costs using distance as a proxy has a significant and negative effect on trade. Our results are in-line with the expectations which can be drawn by looking at trends of trade flows in Asia. Thus, a case is attempted for smoothening trade-flows across the region by reducing tariff and non-tariff barriers, pumping in investments on transport infrastructure and improving productivity of the partners as a whole which has positive effects on GDP and thus trade. JEL Codes: F13, F14, C23