Emerging countries and trade regionalization. A network analysis

Abstract

In this paper, the authors start from the observation of two apparently contradictory trends: the increasing regionalization of trade and the proliferation of regional trade agreements, on the one hand, and the increase of the average number of trading partners of each country and of the trading distances over time due to decreasing transportation and communication costs, on the other, pointing to more globalization. They are brought together to better understand the characteristics of the process of internationalization which is involving so many emerging countries. In particular, by considering the extent of regionalization in trade or the preferentiality of regional trade, as well as the structure of some existing trade agreements in terms of influence of individual countries on intra-regional trade flows, they address the following questions: is internationalization of emerging countries starting at a regional level and eventually evolving to make them global players? Is the growing export strength of many low- or mid-income and size economies due to their linkages to some increasingly important traders in the world market, or is it an autonomous development of their economies? The authors start from a particular specification of bilateral trade intensity indices which allows for measuring revealed trade preferences, overcoming several statistical shortcomings of traditional indicators. They then apply the tools of network analysis, in order to take into account whether local trade structures and preferential agreements affect the overall system of international trade.