Asia-Pacific Integration with China vs. the United States: Examining trade patterns under heterogeneous agricultural sectors

This article compares the effects on global agricultural trade patterns of Asia-Pacific regional economic integration led by the United States versus that by China. Our analysis employs a Eaton-Kortum type model in which agricultural producers have access to technology with heterogeneous productivity. Unlike the standard Eaton-Kortum model, product specific-productivity is linked to a country’s land and climate characteristics and trade costs are product-specific. We derive a structural relationship between the probability a country has comparative advantage in a given export market for an individual agricultural product and the bilateral costs of trading that product controlling for the product-specific unit costs of production from a general equilibrium framework. We specify the relationship as a random coefficients logit model to estimate a country-specific distribution of trade costs and productivity across agricultural products. We use these estimated distributions to explore the set of bilateral relationships from which Asia-Pacific integration is likely to generate the largest shifts in agricultural trade patterns.