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Forces Underlying Trade Integration in the APEC Region: A Gravity Model Analysis of Trade, FDI, and Complementarity

Author

Listed:
  • T. Otsubo, Shigeru

    (Nagoya University)

  • Umemura, Tetsuo

    (University of the Ryukyus)

Abstract

Accompanying the wave of liberalization in motion since the mid 1980s, trade complementarity and its underlying structure of comparative advantage have started to dictate the directions of international trade flows. The vibrant FDIexport- led Asian growth has revealed the role of FDI as a financial gravity for trade integration in the APEC region. Analyses of forces underlying trade integration using trade gravity models with dummies for regional trading arrangements, augmented by the additions of trade complementarity and FDI flows as gravity variables of emerging significance, suggest that 1) APEC is more potent in the creation of intra-regional trade compared to other regional trading arrangements (RTAs); 2) intra-regional trade generation is much more significant in North-North and North-South RTAs as compared to that for the South-South RTAs; 3) trade complementarity is a significant determinant of the directions of trade, and its significance has grown since the mid 1980s with reductions in trade distortions; and 4) inward FDI is a significant determinant of the direction of intra-APEC trade transactions.

Suggested Citation

  • T. Otsubo, Shigeru & Umemura, Tetsuo, 2003. "Forces Underlying Trade Integration in the APEC Region: A Gravity Model Analysis of Trade, FDI, and Complementarity," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 18, pages 126-149.
    • Handle: RePEc:ris:integr:0228
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    Citations

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    Cited by:

    1. Diego Agudelo & Larry Davidson, 2006. "The Gravity of Globalization," Working Papers 2006-15, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    2. Karpaty, Patrik & Gustavsson Tingvall, Patrik, 2011. "Offshoring of Services and Corruption: Do Firms Escape Corrupt Countries?," Working Papers 2011:2, Örebro University, School of Business, revised 28 May 2012.

    More about this item

    Keywords

    APEC; FDI; Gravity model; Trade complementarity; Regional trading arrangements; Integration;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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