An Asean-Eu FTA, regional production sharing, and regional cohesion: focus on Cambodia, Laos and Myanmar

Abstract

This article focuses on the potential effects of an Association of South East Asian Nations (ASEAN)–European Union (EU) Free Trade Agreement (FTA) for Cambodia, Laos and Myanmar (C-L-M), the least developed economies of ASEAN. The authors explore how the particular structure of the ASEAN production sharing network might shed light on the transmission of effects. Gravity models for intra-regional trade are estimated for that purpose. Whereas the existing computable general equilibrium (CGE) analyses consider C-L-M as one rest category, a country-level analysis for the C-L-M countries is presented. It is shown that it is not straightforward that C-L-M would win from an ASEAN–EU FTA. At best, marginal absolute positive effects might be expected for the C-L-M economies. In relative terms, an FTA is not likely to contribute to more economic (and political?) cohesion in the region. It is therefore argued that it makes sense to (re-) connect C-L-M to the negotiation process.