The Impact of ACFTA on ASEAN Economic Growth: Exploring the Mediating Role of Export Diversification.

Abstract

This study examines whether the ASEAN-China Free Trade Area (ACFTA) promotes economic growth among ASEAN member states and whether export diversification mediates this relationship. Drawing on New Trade Theory, Product Space Theory, and Endogenous Growth Theory, we employ Baron and Kenny's (1986) mediation framework within a two-way fixed-effects panel regression across 10 ASEAN countries over 2003–2023 (N = 210), supplemented by the Sobel (1982) test and a cluster bootstrap (1,000 replications). At the aggregate level, ACFTA exerts no significant effect on growth (β = 0.463, p = 0.612), no significant effect on export diversification (β = −0.025, p = 0.383), and mediation is rejected: Sobel indirect effect = −0.114 (z = −0.376, p = 0.707), bootstrapped 95% CI [−1.126, 0.401]. These null results conceal profound development-stage heterogeneity: middle-income ASEAN countries derive a significant annual growth premium of 0.881 percentage points (p = 0.087), strengthening to 1.233 pp (p = 0.007) under a lagged specification that rules out reverse causality. Governance effectiveness is marginally negatively associated with export concentration (β = −0.109, p = 0.081), revealing an institutional diversification channel. Temporal analysis reveals monotonically diminishing structural adjustment costs consistent with J-curve dynamics, and FDI emerges as the most robust growth determinant throughout. This study contributes the first formal mediation test for ACFTA and the first bootstrapped indirect effect estimation in a panel fixed-effects mediation context for this agreement.