Trade Diversion Effects of the New EU Arrangements on ASEAN

Abstract

This paper identifies the product groups of the ASEAN exports to Europe that will experience trade diversion effects from the enlargment of the EU (EU 12) with Austria, Finland and Sweden (EFTA 3) and the European association agreements with the Eastern European countries (EACs) using the methodology of Kreinin and Plummer. This methodology establishes for each sufficiently important ASEAN export product group to the EU 12, the EFTA 3 or the EACs whether or not competition is felt from one of the three groups of European countries, after which the tariff and non-tariff preferences towards European products and against the ASEAN exports are analysed.The share of the exports in ASEAN's external trade with the EU 12, the EFTA 3 and the EACs that is affected by the trade diversion of these recent European integration initiatives, is calculated. It appears that the ASEAN exports to the EU 12 are affected by the accession of the EFTA 3 only to a limited extent, but that the trade diversion effect on the EU 12 and the EFTA 3 markets to be expected from the European association agreements with the EACs is considerable.