In this context, we calculate the export similarity index of competitors in ASEAN market, conclude that there exists fierce competition in ASEAN market for China either on gross trade volume level or on product level, China should optimize its export structure so as not to lose existing market share in ASEAN market. Then we test for the effectiveness of the China-ASEAN FTA in increasing products trade. Applying the gravity model to provide a benchmark for bilateral trade flows, relating them to GDP, distance, language and other characteristics of the trading partners, we found that the variables such as distance, adjacency have the expected signs and are all significant. Besides, after taking account of size and distance effects, the FTA between China and ASEAN had a statistically significant effect on the bilateral trade volume. The results suggest that the trade volume between China and ASEAN members may even be considerably increasing.
Of course, it is possible that if we use more disaggregated data such as differentiated, homogeneous and reference price products data instead of gross trade volume data, a different result might emerge. Yet we have not discussed welfare impacts of free trade agreements which require a different mode of analysis. We leave these important topics for future research.