Methodology for estimating the economic impact of a Free Trade Agreement on ASEAN Countries : case-study : ex-post assessment of five Free Trade Agreements on Vietnam and ex-ante assessment of the Trans-Pacific Partnership Agreement on Vietnam

Abstract

Some ASEAN nations are experiencing a rapid proliferation of Free Trade Agreements (FTAs) and Regional Trade Arrangements (RTAs). These FTAs and RTAs are creating a potentially confusing “noodle bowl” scenario. Therefore, their economic effects need to be estimated by rigorous impact assessments. They particularly need to be evaluated as a testing ground for the ASEAN Economic Community (AEC) that came into effect in 2015. However, discovering and understanding appropriate models for impact assessment is not a straightforward problem. Developed countries usually use Computable General Equilibrium (CGE) Models and Gravity Models to estimate the future or past economic effects of FTAs and RTAs. These models assume a stable market economy with prices set by the equilibrium between supply and demand. However, some ASEAN countries, including Vietnam, are still in transition to market economies. For such economies, we argue that CGEs must be supplemented by Input-Output Models, which do not require this assumption. In addition, because CGE models are sensitive to missing or incorrect data, it is difficult to find enough reliable data to construct a CGE or Partial CGE Model for some ASEAN countries. This thesis investigates two research questions on estimating the economic effects of an FTA or RTA on a developing country. The first research question asks which model can best estimate the economic past or future impacts of a FTA or RTA. We develop a modified Input-Output Model. We combine ideas from the Isard, Chenery-Moses, and Riefler-Tiebout Models. Our approach is designed specifically for analysing the impact of FTAs or RTAs on developing, mixed economies. In the light of this modified model, our second research question asks how our model can be applied to a particular case-study. We estimate the economic effects on the Vietnamese economy of five existing FTAs, including the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA), and one potential future FTA, the Trans-Pacific Partnership. We also use the Comparative Advantage and Competition Model as a complementary tool to investigate the benefits and disadvantages of past FTAs between Vietnam and its main trading partners, as well as an initial investigation of the key Value Chain clusters for the Vietnamese economy. As a result, we supply valuable data and recommendations for governments and entrepreneurs in Australia and Vietnam.

Date of Award	2018
Original language	English
Supervisor	Shuangzhe LIU (Supervisor), Scott Murray (Supervisor), Judith Ascione (Supervisor) & Alice Richardson (Supervisor)