Regional Trade Agreements and the Pattern of Trade: A Networks Approach

Abstract

This paper uses a complex network approach for the analysis trade effects from regional trade agreements on world trade flows. We use bilateral trade data to compute the network community structure for every year between 1970 and 2000. We compare this to null community structures that emerge from various models based on regional and geographical classifications, the implementation of RTA's and gravity models of trade. Our results show that RTA formation appears to have a cyclical pattern on the world trade network community structure. We document periods where bilateral trade flows and the structure of the world trade network are consistent with those predicted by formation of RTAs. These cycles occur in 1980–86 and 1990–96. At the same time, we document periods in which the pattern in the world trade network is not explained by RTA formation. Two periods, 1986–90 and 1997–2000, show a pattern of bilateral trade flows that moves away from the prediction that results from assuming RTA formation as the driving force in the determination of the world trade network structure. Factors contributing to the latter parts of the cycle during our sample period include formation of regional trade networks in East Asia that account for a significant portion of world trade but are not formalised by RTAs in force.

The indirect effects of foreign direct investment on trade: A network perspective

“…The spatial econometrics result is available upon request. Tajoli, 2011;Fagiolo, Reyes, & Schiavo, 2009;Frankel & Rose, 2002;Garlaschelli & Loffredo, 2005;Glick & Rose, 2002;Reyes, Wooster, & Shirrell, 2014;Serrano & Bogun a, 2003) and corporate control (Altomonte & Rungi, 2013;Head & Ries, 2008;Vitali, Glattfelder, & Battiston, 2011) can be considered as networks and their network properties can be used to understand other economic variables (Fagiolo & Mastrorillo, 2014;Ferrier, Reyes, & Zhu, 2016;Riccaboni, Rossi, & Schiavo, 2012;Schiavo, Reyes, & Fagiolo, 2010;Sgrignoli, Metulini, Schiavo, & Riccaboni, 2015). For the world system of either trade or corporate control, we can construct a network, where we identify countries as nodes and interaction channels between them as edges.…”

Are Preferential Agreements Significant for the World Trade Structure? A Network Community Analysis

“…So far, very few studies analyzed communities, or clustering, within the WTN (Reyes et al., ; Barigozzi et al., ), possibly because of the many open issues still existing in the methodologies for community analysis, making the intepretation of the results quite problematic (Fortunato, ). A direct reference to PTAs when looking for communities in the WTN is made by Reyes et al.…”

“…A direct reference to PTAs when looking for communities in the WTN is made by Reyes et al. (), using as a benchmark the groups of countries that signed regional trade agreements, finding that over time the formation of communities follows an irregular pattern. The above‐mentioned studies define and detect communities in the WTN in distinct ways, but in all cases the main problem is that it is difficult to assess the significance of the partitions that emerge.…”

“…So far, very few studies analyzed communities, or clustering, within the WTN (Reyes et al, 2009;Barigozzi et al, 2011), possibly because of the many open issues still existing in the methodologies for community analysis, making the intepretation of the results quite problematic (Fortunato, 2010). A direct reference to PTAs when looking for communities in the WTN is made by Reyes et al (2009), using as a benchmark the groups of countries that signed regional trade agreements, finding that over time the formation of communities follows an irregular pattern. The above-mentioned studies define and detect communities in the WTN in distinct ways, but in all cases the main problem is that it is difficult to assess the significance of the partitions that emerge.…”

Networks and the Dynamics of Firms' Export Portfolio: Evidence for Mexico

“…Dueñas and Fagiolo (2013) compare the topological properties of the actual WTN with the ones obtained from the web predicted by the gravity model. Reyes et al (2014) and Barigozzi et al (2011) explore the community structure of the WTN at the aggregate level and at commodity level, respectively. We are the first to implement this methodology to analyse the country-destination network generated by exporters of one country, Mexico.…”