The Impact of ASEAN Free Trade Area (AFTA) on Selected Agricultural Products in ASEAN Countries: An Application of Spatial Price Equilibrium Model

The Association of Southeast Asian Nation (ASEAN) was created as early as 1967 but ASEAN economic cooperation moved in a lackluster pace with few concrete accomplishments. To move the organization from its benign state of economic cooperation, the member states signed in 1992 the agreement on ASEAN Free Trade Area (AFTA) which is to be fully realized by the year 2003. Although agricultural products were initially excluded from the agreement to protect a sensitive sector like agriculture from open regional competition, the member states decided to include them in AFTA in 1995. Through application of a spatial price equilibrium model, the effects of AFTA on demand, supply, prices and trade of selected agricultural products in ASEAN countries and their major trading partners were analyzed. The spatial characteristic of the model analysis facilitated simulation of trade flows and thus provided insights on the possible changes in intra- and extra-ASEAN trade.