New Horizons in International Business series
Edited by Robert Taylor and Bernadette Andreosso-O’Callaghan
Chapter 9: The Transatlantic Free Trade Area: ASEAN’s perspective
This study examines the displacement effect emanating from export competition between ASEAN and the U.S. into the EU market. This research adds to previous studies in that it takes into account the interaction between ASEAN and the U.S. in their export competition by endogenizing export variables in the model used. Additionally, the determining factor of the displacement effect is derived. Therefore, the cause of the displacement effect can be specified. The experiment is conducted at SITC 2-digit level of machinery and transport equipment (SITC 7) for five major industries under simultaneous equations. The empirical findings using panel data from 2003 Q1 to 2013 Q4 affirm that, from the point of view of ASEAN, the displacement effect is detected in two industries of three ASEAN countries. The empirical analysis has significant policy implications, given that the EU-U.S. FTA may come into force in the near future and ASEAN may encounter increased competition on exports from the U.S. to the EU market in these two affected industries. ASEAN needs to increase the level of competitiveness in the aforementioned industries to ensure accessibility to the EU market. Key words: the Transatlantic Free Trade Area, machinery and transport equipment, displacement effect, export competition, simultaneous equations, ASEAN.
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