Abstract
In contrast to the rapid integration of the world economy, many regional trade agreements (RTAs) have also emerged since the early 1990s. This contradiction has encouraged scholars and policymakers to explore the true effects of RTAs, including both regional and global trade relationships. This paper defines synthesized trade resistance and decomposes it into natural and artificial factors. Here, we separate the influence of geographical distance, economic volume, and overall increase in transportation and labor costs and use the expectation maximization algorithm to optimize the parameters and quantify the trade purity indicator, which describes the true global trade environment and relationships among countries. This indicates that although global and most regional trade relations gradually deteriorated during the period 2007–2017, RTAs generate trade relations among members, especially contributing to the relative prosperity of European Union (EU) and North American Free Trade Agreement (NAFTA) countries. In addition, we apply the network to reflect the purity of the trade relations among countries. The effects of RTAs can be analyzed by comparing typical trade unions and trade communities, which are presented using an empirical network structure. This analysis shows that the community structure is quite consistent with some trade unions, and the representative RTAs constitute the core structure of international trade network. However, the role of trade unions has weakened, and multilateral trade liberalization has accelerated in the past decade. This means that more countries have recently tended to expand their trading partners outside of these unions rather than limit their trading activities to RTAs.
Highlights
With the rapid development of international trade, as of 2020, the World Trade Organization (WTO) has 164 members representing 98 percent of world trade
In 2013, 546 notifications of regional trade agreements (RTAs) were received by the General Agreement on Tariffs and Trade (GATT)/WTO [2]. e role of RTAs raises questions among scholars and policymakers: what drives an increasing number of countries to join regional trade unions, and how will this affect regional trade patterns and globalization processes? Trade creation and trade diversion have been proposed to describe the effects of RTAs [3, 4]
Trade creation refers to new trade arising between member countries due to the deduction of tariffs, while trade diversion means that imports from a low-cost outsider country are replaced by imports from a higher cost member country because of RTAs [5]
Summary
With the rapid development of international trade, as of 2020, the World Trade Organization (WTO) has 164 members representing 98 percent of world trade. E innovation of this paper is to study and describe the trade purity relationship of countries, with some other typical factors, such as economic volume, geographical distance, and overall increase in transportation and labor costs, being separated. Compared with the exogenous parameter estimation in the existing research on trade cost quantification [15,16,17,18], the method in this paper is more scientific and effective, and it could be extended to discuss the effects of RTAs on a number of countries around the world. Erefore, comparing the members of typical trade unions and trade communities in the global trade network could facilitate research on the effectiveness of RTAs. e paper is organized as follows: Section 2 briefly describes the data source and the gravity model with synthesized trade resistance.
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