Trade configurations in Asia: Assessing de facto and de jure regionalism

Sasidaran Gopalan, Luu Nguyen Trieu Duong and Ramkishen Rajan

The World Economy, 2020, vol. 43, issue 4, 1034-1058

Abstract: Given the backdrop of significant uncertainties largely propelled by the ongoing trade spat between the United States and China, to what degree can the Asian region move forward in terms of de facto trade integration? Drawing on the new economic geography literature, this paper offers new insights into the literature on trade regionalism in Asia by empirically illustrating how Asian economies can tap into the regional market potential. Specifically, the paper examines the scope for further de facto integration among the Asian countries engaged in the negotiation for the Regional Comprehensive Economic Partnership (RCEP) Agreement by estimating foreign market potential (FMP) indices. To preview the main findings, the empirical analysis demonstrates that the share of intra‐regional trade in total RCEP trade flows and, consequently, the ratio between within‐ and outside‐RCEP trades are significantly lower than what they could potentially be. The paper makes a case that the enhancement of de jure integration among these economies through the RCEP must be accompanied by efforts to improve de facto integration.

Date: 2020
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