ASEAN Economic Cooperation: Trade Liberalization Impacts on the National Economy

Abstract

This study aims to analyse the impact of trade liberalization by focusing on twelve priority industrial sectors in the ASEAN-5 (Singapore, Thailand, Indonesia, Malaysia and the Philippines). The General Equilibrium Model based on Multi-country Input Output Data as provided by the GTAP is used to measure potential economic benefits of reducing tariffs on output, trade balance, welfare gain, and competitiveness. We compare the outcome of the CGE approach with the Cost Benefit Analysis (CBA) based on the Analytical Hierarchy Process (AHP). The results show that the outcomes of the CGE Model does not match those suggested by the AHP. However, they do support the findings of Falianty (2005), Achsani and Siregar (2010), Achsani and Partisiwi (2010), Nugroho and Yanfitri (2011). Our results suggest that taking non-economic but relevant factors from public opinion into account affects the robustness of CGE studies based purely on economic factors.