Measuring Trade Regionalisation: The Case of Asia
This paper takes stock of the literature on the measurement of regional trade integration, showing that traditional indicators, based on bilateral trade intensity indices, are biased by some statistical problems and fail to take properly into account the geographic diversification of intra-and extra-regional trade relationships, as well as the role of distance among trading partners. The paper suggests how to solve these problems through simple descriptive indicators of „revealed trade preferences‟ and relative geographic diversification, that can be adjusted for differences in bilateral distances, and could be used also to better specify gravity models of trade. Moreover, the paper builds on recent statistical techniques based on network analysis, in order to understand to what extent they can be useful to better describe the topology of regional trade networks. The empirical section of the paper applies all these indicators to the case of Asia, where an increasing number of bilateral free trade agreements overlaps the growth of market-driven preferential commercial relationships. The paper confirms that the development of these processes is leading to a regionalisation of trade patterns, particularly in the ASEAN region.