The Impact Of China-Asean Free Trade Agreement To The Philippine Economy

With the signing of China-ASEAN Free Trade Agreement (CAFTA), China has the potential to become the biggest export market of the Philippines. However, it can also be a threat to the Philippine local industries since the former is also the biggest exporter in the world by value. This study aims to measure the impact of CAFTA to the Philippine economy. The study uses imports, exports, and the trade policy, which is the CAFTA as exogenous variables to test its effects on productivity, growth, and employment of the Philippine economy. The results showed that the imports and CAFTA have positive effects on GDP, growth, and employment. On the other hand, exports have a negative impact on employment, while CAFTA remains to have a positive effect on it. Through international trade theory and panel data regression analysis, the study finds out that CAFTA will have a positive effect on the economy in general. The country would be able allocate factor inputs more efficiently through the free trade agreement.