A GRAVITY STUDY OF THE PROPOSED CHINA-ASEAN FREE TRADE AREA

Abstract The proposed China-ASEAN Free Trade Area (CAFTA) has drawn much interest both at the regional and international level. This interest is justified given the recent surge in regional trade agreements. The implications the FTA will have for the less developed economies of Cambodia, Laos, Myanmar, and Vietnam (the CLMV economies) are of concern. How would trade between the integrating area and the rest of the world be affected? Will there be net trade creation or net trade diversion effects? What trading partners are likely to loose or gain following formation of the FTA in 2010? These are some of the issues that this article addresses by way of the Gravity Model of trade.