Why regional economic agreements matter more than multilateral and bilateral agreements: Evidence from trade and investment in East Asia
Year: 2025
Type: article
Abstract: International economic agreements—classified as multilateral, regional, and bilateral—mitigate institutional barriers that firms face when engaging in cross-border business. Such agreements facilitate cross-border business by providing safeguards, but variations in their safeguarding quality are evident. Building on new institutional economics and regionalization literature, this paper brings the regional dimension to institutional analysis, suggesting that regional agreements are higher quality than other types. I theorize that regional economic agreements involve greater safeguarding advantages for enhancing trade and FDI, in comparison to multilateral and bilateral economic agreements. I further propose that their relative strengths are more pronounced in countries with low institutional quality than in those with high institutional quality. Using panel data on trade and FDI relationships in Asia from 2000 to 2016, the results corroborate the hypotheses, highlighting that regional agreements define regional borders that matter to foreign transactions, which contributes to research on the nexus between regions and international business. • Regional economic agreements are more effective in enhancing trade and FDI than multilateral and bilateral agreements. • Regional economic agreements are more effective in countries with low institutional quality than in high-quality ones. • Expanding regional agreements may introduce costs, suggesting a need to balance the size and diversity of member countries.
Source: International Business Review
Author: Der-Ting Huang
Institution: Copenhagen Business School
Language: English
Topic: Global trade and economics
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $4,550
OpenAlex ID: W7106690092