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Complex Networks in Economics and Finance

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Front. Phys. | doi: 10.3389/fphy.2018.00134

Bilateral trade agreements and the interconnectedness of global trade

Julian Maluck1, 2*, Nicole Glanemann1, 3 and  Reik Donner1*
  • 1Potsdam-Institut für Klimafolgenforschung (PIK), Germany
  • 2Humboldt-Universität zu Berlin, Germany
  • 3WHU - Otto Beisheim School of Management, Germany

Over the last decades, bilateral trade agreements (BTAs) have increased considerably in number and economic relevance. Notably, such agreements substantially affect global trade, since the reorganization of flows of goods and services has prominent impacts on the contracting countries' economies, but also on other parties that are (directly or indirectly) engaged in trade with these countries. Here, we empirically study the effect of BTAs on the input-output linkages between the contractual parties' national economic sectors by defining a new measure of Trade Interconnectedness (TI), which describes the relative importance of direct and indirect production linkages between the two countries in the international trade network. By analyzing its time evolution for each pair of trade agreement partners, we demonstrate that while most BTAs are succeeded by an increase in TI between the contractors, there are some notable exceptions. In particular, comparing the trade profiles of China and the United States (US), we find indications that both countries have been pursuing fundamentally different objectives and strategies related to the negotiation of BTAs.

Keywords: Trade agreements, international trade, Complex networks (CNs), Network of Networks, Random Walk (RW)

Received: 01 Aug 2018; Accepted: 07 Nov 2018.

Edited by:

Thiago C. Silva, Universidade Católica de Brasília, Brazil

Reviewed by:

Dror Y. Kenett, Johns Hopkins University, United States
Benjamin M. Tabak, Fundação Getúlio Vargas, Brazil
Francesco Caravelli, Los Alamos National Laboratory (DOE), United States  

Copyright: © 2018 Maluck, Glanemann and Donner. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY). The use, distribution or reproduction in other forums is permitted, provided the original author(s) and the copyright owner(s) are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.

* Correspondence:
Dr. Julian Maluck, Potsdam-Institut für Klimafolgenforschung (PIK), Potsdam, 14473, Brandenburg, Germany, julian.maluck@pik-potsdam.de
Dr. Reik Donner, Potsdam-Institut für Klimafolgenforschung (PIK), Potsdam, 14473, Brandenburg, Germany, reik.donner@pik-potsdam.de