Trade Integration in the Asia-Pacific Region: Decomposition of Effects

Dmitry Izotov

Spatial Economics=Prostranstvennaya Ekonomika, 2021, issue 1, 66-96

Abstract: The article uses international statistics to make a comparative assessment of the effects of integration within the Asia-Pacific region, the Western and Eastern macro-zones of the Asia-Pacific region, in terms of the contribution of the processes of globalization and regionalization in 1994–2018 due to trade agreements and their expansion. The resulting assessment of the effects of integration indicated a greater contribution of the globalization process to the growth of trade in the Asia-Pacific region (APR), especially for the countries of the Eastern macro-zone. It was found that in the Eastern macro-zone, the impact of trade agreements hindered the positive effects of integration. The author discovers fundamental differences between the effects occurring from expanding trade agreements. The process of globalization prevailed over regionalization only in the exporting countries of the Eastern macro-zone; the effects from regionalization were stronger for the importing countries compared to the exporters, which indicates the manifestation of the effect of trade diversion in the Eastern macro-zone. Obtained estimates indicate that from 1994 to 2018, the globalization process acted as a necessary condition for the expansion of trade in both the APR as a whole and in its Western macro-zone, while the process of regionalization played an important supporting role. In the Eastern macro-zone the positive effects of globalization compensated for the ambiguous effects of the regionalization, which, possibly, was the reason for the unsuccessful attempts to create trade mega-formats within this macro-zone. At the same time, the Eastern macro-zone countries that were expanding trade agreements (based at the economic framework) have achieved noticeable increase in trade interactions, especially exports. This is why it is assumed that the quality of the trade agreements, which affects the impact from their realization, is crucial as the assessment of the effects from proliferation of trade agreements demonstrate implicit discrimination of the countries that implement moderate policy of reducing trade barriers through trade agreements. Given the small size of domestic markets, the APR countries implementing such policy can only rely on the effects from globalization, which tend to diminish over time

Keywords: trade; the process of globalization; the process of regionalization; integration; the effect of trade integration; the effect of the proliferation of trade agreements; trade agreement; free trade area; customs union; APR’ Eastern macro-zone; APR Western macro-zone; Asia-Pacific Region (search for similar items in EconPapers)
JEL-codes: C54 F15 F60 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:far:spaeco:y:2021:i:1:p:66-96

DOI: 10.14530/se.2021.1.066-096

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