Geographical and Product Decomposition of the Trade Agreements Effects in the Asia-Pacific Region

Abstract

Trade integration associated with globalization and regionalization processes has contributed to the expansion of trade among countries of Asia-Pacific Region (APR), with the contribution of the globalization process to the integration effect being dominant. This study tests the hypothesis that regionalization associated with trade agreements has stimulated trade in certain product markets concentrated within a particular geographical part of the APR. Disaggregation estimates of integration effects were made based on a gravity model for manufactured and primarily products traded in the Western macrozone, in the Eastern macrozone and between macrozones of the APR respectively for the period 1996–2021. The estimates confirmed the hypothesis that the positive effects of regionalization in the APR stimulated only by the market for manufactured products traded in the Western macrozone and between the APR macrozones. Correspondingly, the positive effects of regionalization for the Eastern macrozone countries for manufactured products segment during the period under analysis were associated with trade agreements exclusively with East Asian countries located in the Western macrozone. For the APR countries specializing in exports of primarily products, the long-term strategy of expanding trade agreements was not significant in contrast to countries specializing in trade of manufactured products and promoting industrial cooperation. The assessments revealed the suppression of primarily products trade within the Western macrozone, clearly indicating the targeted priority of trade agreements in expanding of manufactured products trade. The estimates also identified reasons for the dominance of globalization in the effects of integration in the APR: the functioning of the commodities market; the expansion of trade agreements among Eastern macrozone countries, driven by political rather than economic motives