Free trade agreements and production sharing in Malaysian manufacturing industries

Pai Wei Choong, Noor Aini Khalifah, Abu Hassan Shaari Md Nor, Mohd Adib Ismail

Research output: Contribution to journalArticle

Abstract

Malaysia unilaterally reduced its tariff and expanded its bilateral manufactured exports in the 1990s. However, in the 2000s, Malaysia signed a growing number of free trade agreements (FTA) to lower its tariff among member countries. This study examines the impact of the growing number of FTAs on Malaysia's bilateral manufactured exports at industry level in general, based on production sharing in particular over the period of 1990 to 2016 by three-year average. FTA-and-foreign input interaction term is embedded in the gravity equation model to examine the extent of FTAs in expanding production sharing-based bilateral manufactured exports. The empirical results of this study are based on dynamic panel system generalized method of moments (SYS-GMM) technique where FTA dummies are weakly exogenous. The findings show that the ASEAN Free Trade Area (AFTA) and bilateral trade agreements have significant impact on Malaysia's non-resource-based exports and are associated with production sharing; while AFTA-plus-one shows no evidence of diverting Malaysian production sharing-based bilateral manufactured exports from its member countries. Moreover, FTA formation has no relation to the Malaysian resource-based exports. The proliferation of FTAs does not assure net export-enhancing effect on manufacturing activities among member countries, but is largely associated with international production sharing.

Original languageEnglish
Pages (from-to)97-111
Number of pages15
JournalJurnal Ekonomi Malaysia
Volume52
Issue number3
DOIs
Publication statusPublished - 1 Jan 2018

Fingerprint

Free trade agreements
Manufacturing industries
Malaysia
Bilateral
Tariffs
Free trade area
Generalized method of moments
Resource-based
Bilateral trade agreements
Gravity equation
Proliferation
Net export
Interaction terms
Manufacturing
Dynamic panel
Empirical results
Industry

Keywords

  • free trade agreements
  • gravity model
  • international production sharing
  • International trade
  • manufacturing Malaysia

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

Cite this

Free trade agreements and production sharing in Malaysian manufacturing industries. / Choong, Pai Wei; Khalifah, Noor Aini; Md Nor, Abu Hassan Shaari; Ismail, Mohd Adib.

In: Jurnal Ekonomi Malaysia, Vol. 52, No. 3, 01.01.2018, p. 97-111.

Research output: Contribution to journalArticle

Choong, Pai Wei ; Khalifah, Noor Aini ; Md Nor, Abu Hassan Shaari ; Ismail, Mohd Adib. / Free trade agreements and production sharing in Malaysian manufacturing industries. In: Jurnal Ekonomi Malaysia. 2018 ; Vol. 52, No. 3. pp. 97-111.
@article{e4f430521e5040388035885880607fd0,
title = "Free trade agreements and production sharing in Malaysian manufacturing industries",
abstract = "Malaysia unilaterally reduced its tariff and expanded its bilateral manufactured exports in the 1990s. However, in the 2000s, Malaysia signed a growing number of free trade agreements (FTA) to lower its tariff among member countries. This study examines the impact of the growing number of FTAs on Malaysia's bilateral manufactured exports at industry level in general, based on production sharing in particular over the period of 1990 to 2016 by three-year average. FTA-and-foreign input interaction term is embedded in the gravity equation model to examine the extent of FTAs in expanding production sharing-based bilateral manufactured exports. The empirical results of this study are based on dynamic panel system generalized method of moments (SYS-GMM) technique where FTA dummies are weakly exogenous. The findings show that the ASEAN Free Trade Area (AFTA) and bilateral trade agreements have significant impact on Malaysia's non-resource-based exports and are associated with production sharing; while AFTA-plus-one shows no evidence of diverting Malaysian production sharing-based bilateral manufactured exports from its member countries. Moreover, FTA formation has no relation to the Malaysian resource-based exports. The proliferation of FTAs does not assure net export-enhancing effect on manufacturing activities among member countries, but is largely associated with international production sharing.",
keywords = "free trade agreements, gravity model, international production sharing, International trade, manufacturing Malaysia",
author = "Choong, {Pai Wei} and Khalifah, {Noor Aini} and {Md Nor}, {Abu Hassan Shaari} and Ismail, {Mohd Adib}",
year = "2018",
month = "1",
day = "1",
doi = "10.17576/JEM-2018-5203-7",
language = "English",
volume = "52",
pages = "97--111",
journal = "Jurnal Ekonomi Malaysia",
issn = "0126-1962",
publisher = "Penerbit Universiti Kebangsaan Malaysia",
number = "3",

}

TY - JOUR

T1 - Free trade agreements and production sharing in Malaysian manufacturing industries

AU - Choong, Pai Wei

AU - Khalifah, Noor Aini

AU - Md Nor, Abu Hassan Shaari

AU - Ismail, Mohd Adib

PY - 2018/1/1

Y1 - 2018/1/1

N2 - Malaysia unilaterally reduced its tariff and expanded its bilateral manufactured exports in the 1990s. However, in the 2000s, Malaysia signed a growing number of free trade agreements (FTA) to lower its tariff among member countries. This study examines the impact of the growing number of FTAs on Malaysia's bilateral manufactured exports at industry level in general, based on production sharing in particular over the period of 1990 to 2016 by three-year average. FTA-and-foreign input interaction term is embedded in the gravity equation model to examine the extent of FTAs in expanding production sharing-based bilateral manufactured exports. The empirical results of this study are based on dynamic panel system generalized method of moments (SYS-GMM) technique where FTA dummies are weakly exogenous. The findings show that the ASEAN Free Trade Area (AFTA) and bilateral trade agreements have significant impact on Malaysia's non-resource-based exports and are associated with production sharing; while AFTA-plus-one shows no evidence of diverting Malaysian production sharing-based bilateral manufactured exports from its member countries. Moreover, FTA formation has no relation to the Malaysian resource-based exports. The proliferation of FTAs does not assure net export-enhancing effect on manufacturing activities among member countries, but is largely associated with international production sharing.

AB - Malaysia unilaterally reduced its tariff and expanded its bilateral manufactured exports in the 1990s. However, in the 2000s, Malaysia signed a growing number of free trade agreements (FTA) to lower its tariff among member countries. This study examines the impact of the growing number of FTAs on Malaysia's bilateral manufactured exports at industry level in general, based on production sharing in particular over the period of 1990 to 2016 by three-year average. FTA-and-foreign input interaction term is embedded in the gravity equation model to examine the extent of FTAs in expanding production sharing-based bilateral manufactured exports. The empirical results of this study are based on dynamic panel system generalized method of moments (SYS-GMM) technique where FTA dummies are weakly exogenous. The findings show that the ASEAN Free Trade Area (AFTA) and bilateral trade agreements have significant impact on Malaysia's non-resource-based exports and are associated with production sharing; while AFTA-plus-one shows no evidence of diverting Malaysian production sharing-based bilateral manufactured exports from its member countries. Moreover, FTA formation has no relation to the Malaysian resource-based exports. The proliferation of FTAs does not assure net export-enhancing effect on manufacturing activities among member countries, but is largely associated with international production sharing.

KW - free trade agreements

KW - gravity model

KW - international production sharing

KW - International trade

KW - manufacturing Malaysia

UR - http://www.scopus.com/inward/record.url?scp=85061611317&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85061611317&partnerID=8YFLogxK

U2 - 10.17576/JEM-2018-5203-7

DO - 10.17576/JEM-2018-5203-7

M3 - Article

VL - 52

SP - 97

EP - 111

JO - Jurnal Ekonomi Malaysia

JF - Jurnal Ekonomi Malaysia

SN - 0126-1962

IS - 3

ER -