Is Pan-Asian Economic Integration Moving Forward? Evidence from Regional Trade Statistics

Asia is growing economically faster than any other region in the world that even led the shift of the center of gravity of global economy from West to East. However, it is not clear whether the Asian economy is integrating more regionally or globally. In the context of growing efforts of regional integration at pan-Asian as well as its sub-regional level, it is worthwhile to explore the pan-Asian trade flows regionally as well as globally. Thus, this paper examines the trend and determinants of economic integration in pan-Asia, and it’s sub-regions in terms of the trade intensity index (TII) and intra-regional trade share. ADB's ARIC database revealed that despite rapid increase in intra-Asian trade volume of all countries from 1990 to 2012, the trends of intra-regional trade share of different countries are different indicating that countries in the region are functioning independently and stronger economic tie is yet to build within the pan-Asia and its sub-regions. Furthermore, the dynamic panel data analysis resulted that FTAs/RTAs are one of the main determinants of growing intra-Asian trade share. Other determinants are countries' level of economic development, FDI stock, urban population growth and access to ICT. Thus, we argue that active participation in FTAs/RTAs, open FDI policy, urbanization and technological development of Asian countries create an enabling environment for pan-Asian economic integration.