ANALYZING THE IMPACT OF ACFTA ON CHINA'S IRON AND STEEL TRADE TO ASEAN COUNTRIES: A GRAVITY MODEL PERSPECTIVE
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Abstract
The ASEAN-China Free Trade Area (ACFTA) agreement is a form of regional economic integration aimed at reducing tariff barriers and promoting trade flows between ASEAN countries and China. Iron and steel are among China's leading export commodities that have experienced a significant increase in imports within ASEAN, particularly after tariff reductions in 2012 and 2018. This study aims to examine the impact of ACFTA on China's iron and steel exports to six ASEAN countries—Indonesia, Malaysia, Thailand, Vietnam, Singapore, and the Philippines—by employing an augmented gravity model using panel data from 2005 to 2019. The estimation results reveal that the ACFTA dummy variable, real GDP of ASEAN countries, inflation, real exchange rate, and domestic consumption of iron and steel significantly influence the import value from China. The Import Dependency Ratio (IDR) analysis also indicates a high dependence of ASEAN on Chinese iron and steel products. These findings suggest that trade integration through ACFTA strengthens China's dominant export position in this sector while posing serious challenges to domestic iron and steel industries in ASEAN countries. Therefore, downstream industrial policies and adaptive import substitution strategies are essential in navigating free trade dynamics.
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