Intra-regional Trade Effects of ASEAN Free Trade Area in the Textile and Clothing Industry

Intra-regional Trade Effects of ASEAN Free Trade Area in the Textile and Clothing Industry

This study investigates intra-regional trade effects of the ASEAN Free Trade Area in the textile and clothing industry by focusing on trade competitiveness and complementarities. Using a novel method of investigating intra-regional trade through 20 bilateral pairs of ASEAN countries, the study analyzed 1,040 observations at the HS3 level to determine revealed comparative advantage and intra-industry trade. The results for both revealed comparative advantage and intra-industry trade in the context of the textile and clothing industry show that most ASEAN countries compete predominantly in trade of unprocessed products or raw materials. Consumer or finished products do not exhibit a high degree of competition, which suggests that product diversification has enabled ASEAN countries to actively export to the global market. The results also show trade-creating and trade-diverting effects in a number of products categories, categories, suggesting that this divergence may disrupt ASEAN`s vision of becoming a regional hub for the textile and clothing industry.