Singapore and ASEAN: A Study on Intra-Industry Trade

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Southeast Asia, with Singapore in the lead, has seen the importance of integration, both regionally and with the rest of the world. The region has had high growth rates during the past years and it has benefited from trade creation through its free trade agreements, both multilateral and bilateral. Due to its successful FTAs, Singapore has been able to specialize in trade and has become an important trade harbor in the region. This study examines the form of specialization between Singapore and ASEAN and Singapore and the rest of the world. The theory of FTAs, intra-industry trade and North-South trade are described and studied in the context of Singapore??s situation. The conclusion is made that if there is IIT in North-South trade it is most likely to be of a vertical nature. If IIT occurs in North-South trade the formation of production networks is likely to take place. Furthermore, the level of Singapore??s intra-industry trade with the ASEAN countries is measured with the Grubel-Lloyd index and compared to the level of intra-industry trade Singapore has with the rest of the world. Singapore??s IIT is found to be high and is analyzed with the help of economic theory. The most important partners for Singaporean trade all are in a free trade agreement with the city-state. Singapore??s FTAs have been important for its IIT and the importance of ASEAN in Singaporean trade has been growing for the past fifteen years. Singapore and ASEAN are put in the North-South trade model and are examined to see if differences in GDP per capita an...