Do regional trade agreements increase trade? Empirical evidence from the Asia–Pacific region

Abstract

Abstract This article examines the effects of regional trade agreements. The augmented gravity model of international trade is used to test for trade creation and diversion in the context of trade agreements in the Asia‐Pacific region. The results of the estimated model indicate that trade has increased among the members of AFTA and APTA but not among the AANZFTA members. Differences in the levels of development appear to have a significant impact on trade flows, suggesting that there can be no general presumption about the extent of trade creation and trade diversion.