Intra-National versus International Trade in Southeast Asia : Do National Borders Matter?

This paper aims to estimate the border effects among the members of ASEAN free trade agreement on the period of 1987-2016. We employ the multiplicative gravity equation with PPML estimator. By utilizing the annual bilateral trade flows data on country level, we find national borders do matter in reducing international trade within the Southeast Asian countries. Our empirical results show that the size of border effects decreases over time with a noticeable drop after the free trade agreement took place, especially in the year 2004 onward, and implies that ASEAN moved towards a more integrated region in term of international trade over time. We also find a common language and historical links are unimportant factors in advancing international trade among AFTA members. Nevertheless, having direct access to the sea contributes positively to international trade