Understanding the evolution of the world trade network : an analytic network process framework

This paper combines weighted and non-weighted networks to analyse the evolution of the world trade web for the period 1995 through 2013 (with a particular focus on China) deconstructing the most influential factors and related characteristics. The results show that the world trade web has a relatively high density and increasingly tighter structure indicating the existence of closer trade relationships. However, the web is still an extremely asymmetric network that is led by the main trading powers. Therefore, whether weighted or non-weighted the symmetric index of the world trade web fluctuation is around 0.1. Based on specific situations of countries in this web our research finds that most countries have relatively high trade partners and low trade intensity and that only a few countries show high trade disparity. And from fluctuation of correlation between related nodal indexes, countries with fewer trade partners tend to trade with countries with relative more trade partners. Meanwhile, countries with low trade intensity tend to trade with countries with high trade intensity. The feature of "disassortative-mating" and "rich club" still exists in this web which has no significant improvement compared with that in previous research. Moreover, the structure of "hub and spoke" becomes increasingly more obvious. Furthermore, analysis of influential factors shows that only the difference in foreign direct investment has a relatively larger impact on the world trade web structure among the major factors (e.g. exchange rates, inflation rate) affecting trade flows. At the same time an important finding of this research is that economic and trade organisation and regional trade agreements among different countries have significant influence on the world trade web. Geographical association, difference in foreign direct investment, economic and trade organisation and regional trade agreement association can explain 30.3% of the variation of the world trade web. Supported by these conclusions the following policy initiatives are suggested as the way forward for China: first of all, China needs to participate in global governance at a more deeper level. It is suggested that China not only obey and uphold international trade rules but also promote and lead the formation of trade rules. Through this mechanism China will be able to develop and maintain a multilevel trade system. Secondly, due to the significant influence of cooperation China needs to carry on internal mediation in APEC and promote FTAAP gradually in order to reduce negative impact caused by TPP. China should increase its regional trade agreements in the Asia-Pacific area through which it can establish its own "hub and spoke" structure. At the same time the "One Belt and One Road" strategy will help China transform political trust and economic complementarity to cooperation benefits for all its trading partners in the region.