The Effect of the ASEAN FTA on Intra-Regional Trade in Lao PDR

Abstract

Purpose - This study aims to estimate the effects of the Association of South-East Asian Nations Free Trade Area (AFTA) on international trade in Lao People’s Democratic Republic (PDR) Design/Methodology/Approach - This study empirically analyzes the effects of AFTA on Lao PDR’s intra-regional trade with ASEAN countries using a gravity model by employing panel data from ten ASEAN countries from 1990 to 2017. Findings - This paper finds that joining AFTA positively affects aggregate trade volume and exports of Lao PDR. However, joining AFTA does not positively impact Lao PDR’s imports. Research Implications - With a very limited number of studies on the effect of AFTA on Lao PDR, most previous studies examine the effect on Lao PDR using a subset of ASEAN countries. This paper contributes to the literature by being the first to empirically analyze the effect of AFTA on intra-regional trade in Lao PDR with all ten ASEAN member countries. The findings of the study suggest that further extending FTA networks with other countries will promote Lao PDR’s trade and its access to the international market.