Determinants of Trade Between Taiwan and ASEAN Countries: A PPML Estimator Approach

Abstract

Taiwan and Association of Southeast Asian Nations (ASEAN) do not have any diplomatic ties, but they have enjoyed significantly economic benefits, especially bilateral investment and trade cooperation. Over the period 2000–2017, trade between Taiwan and ASEAN had significantly focused on manufactured goods embodied with high-skill and technology-intensive content. Using gravity model with a PPML (Poisson pseudo-maximum-likelihood) estimator, this article explores determinants of bilateral trade flows between them at both aggregate and sectoral levels. We found that economic scale and per capital income of ASEAN have much stronger effects than those of Taiwan at both aggregate trade and the degree of manufacturing. Results also show that bilateral trade between Taiwan and ASEAN has been efficiently performed over recent decades, except for cases of Myanmar and Cambodia. Hence, a dynamic approach should be taken by both sides to promote bilateral trade relations in future.