Abstract
This paper attempts to provide a clear and comprehensive picture of trade integration in Asia, using a trade linkage diagram. The paper reviews four types of indicators (share, intensity, homogeneous intensity, and introversion index) and argues that the introversion index is the most suitable indicator for the comparison of the level of trade integration, both in terms of cross-regional comparisons and time series analyses. Next, since Asia is a group of heterogeneous economies and the level of integration across subregions is not consistent, the paper includes a subregional analysis of trade integration in Asia. The analysis includes the (i) regional introversion of each subregion, (ii) intersubregional trade linkage, and (iii) extraregional trade linkage of each subregion. The subregional trade linkage diagram based on the introversion index provides us with a snapshot of trade integration, which is useful for both scholars and policy makers. At a glance, we can understand who trades more than others, and with whom.
Highlights
Presentations and articles on trade in Asia by scholars and policy makers tend to start with remarks that regional trade is becoming more integrated
We reviewed various indicators that are used in assessing the levels of trade integration and linkage
An intensity indicator, such as intraregional intensity, is better than a share indicator, but is still not the ideal indicator for comparison. This is because the range variability of the intensity index depends on the size of the partner region, which means that the upper limit of intensity tends to be low for a large region
Summary
Presentations and articles on trade in Asia by scholars and policy makers tend to start with remarks that regional trade is becoming more integrated. Comparisons of levels of trade integration, in terms of both time series and cross-regional analyses, require the careful selection of a methodologically sound indicator. In analyzing the bias in terms of the direction of trade, we propose to use the introversion index, which is suitable for making comparisons, rather than the share or intensity indicators. The trade linkage diagram based on the introversion index illustrates the level of directional and geographical bias of trade that a regional group or economy has toward itself or its partners. We will review the indicators used by existing literature in assessing the level of trade integration.
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