Adjusting Towards AFTA : The Dynamics of Trade in ASEAN

The decision to establish the ASEAN Free Trade Area (AFTA) was initially met with widespread enthusiasm. Some of this enthusiasm has since dissipated as all countries except Singapore have voiced concerns regarding the ability of sensitive industries to compete in the new protection-free environment. Underlying these concerns is the view that the evolving pattern of trade will be more complementary, or that inter-industry of net trade will dominate intra-industry trade. This study employs a new methodology to analyse the dynamics of trade in the ASEAN countries as they approach the deadline of AFTA, with a view to identify likely adjustment costs associated with liberalizing their trade.