Does APEC Facilitate Bilateral Trade? Evidence from Gravity Model Estimation

Marthin Thomas Mumbunan; Marianus Antonius  Muga; Yoan Purnamasari Makapuase  Bahalau

doi:10.55227/ijhess.v5i6.2439

Authors

Marthin Thomas Mumbunan Akademi Bisnis dan Keuangan Primaniyarta
Marianus Antonius Muga Economic Planning and Development Policy, Faculty of Economics and Business, University of Indonesia
Yoan Purnamasari Makapuase Bahalau Program Studi Perbankan dan Keuangan Digital, Akademi Bisnis dan Keuangan Primaniyarta

DOI:

https://doi.org/10.55227/ijhess.v5i6.2439

Keywords:

APEC, Bilateral Trade, Gravity Model

Abstract

Trade agreements and regional forums such as the Asia‑Pacific Economic Cooperation (APEC) and Free Trade Agreements (FTAs) are key instruments in promoting trade liberalization, though their effectiveness in enhancing bilateral trade flows remains contested. Unlike FTAs, which are legally binding and involve tariff and non‑tariff reductions, APEC is a non‑binding forum that facilitates trade through policy harmonization, cost reduction, and improved connectivity. This study evaluates the impact of APEC and FTAs on bilateral trade using the gravity model with Poisson Pseudo‑Maximum Likelihood (PPML) estimation, complemented by Pooled OLS for comparison. The results show that APEC membership has a broader and more consistent positive effect on bilateral trade than FTAs, despite the latter’s binding nature. Geographic distance remains a significant barrier, while exchange‑rate fluctuations are largely insignificant. The findings highlight that APEC’s effectiveness is shaped not only by institutional design but also by structural and domestic factors, underscoring the need for adaptive trade policies tailored to country‑specific contexts

References

Anderson, J. E., & Van Wincoop, E. (2003). Gravity with gravitas: A solution to the border puzzle. American Economic Review, 93(1). https://doi.org/10.1257/000282803321455214

APEC. (2024). Achievements and Benefits. https://www.apec.org/about-us/about-apec/achievements-and-benefits

Börzel, T. A. (2016). Theorizing Regionalism. In The Oxford Handbook of Comparative Regionalism (pp. 41–63). Oxford University Press. https://doi.org/https://doi.org/10.1093/oxfordhb/9780199682300.013.4

Canton, H. (2021). Asia-Pacific Economic Cooperation-APEC. In The Europa Directory of International Organizations 2021 (pp. 436–443). Routledge.

Capoani, L. (2024). The gravity equation in international trade: an overview of the introduction of gravity to the study of economics and its systematic barriers. European Journal of the History of Economic Thought, 31(3). https://doi.org/10.1080/09672567.2024.2329064

Che, Z., Kong, M., Wang, S., & Zhuang, J. (2023). How Does the COVID-19 Pandemic Impact Internal Trade? Evidence from China’s Provincial-Level Data. Sustainability (Switzerland), 15(14). https://doi.org/10.3390/su151410769

Cipollina, M. (2022). The Trade Growth under the EU–SADC Economic Partnership Agreement: An Empirical Assessment. Economies, 10(12). https://doi.org/10.3390/economies10120302

Emikönel, M. (2022). The Impact of International Organizations on Chinese Trade as the Determiner of Trade: The Gravity Model Approach. Chinese Economy, 55(1). https://doi.org/10.1080/10971475.2021.1892920

Feng, L., Chen, B., Wu, G., & Zhang, Q. (2024). Global renewable energy trade network: patterns and determinants. Environmental Science and Pollution Research, 31(10). https://doi.org/10.1007/s11356-024-32066-x

Gaspar, J. M. (2020). Paul Krugman: contributions to Geography and Trade. Letters in Spatial and Resource Sciences, 13(1). https://doi.org/10.1007/s12076-020-00247-0

Gharleghi, B., & Shafighi, N. (2020). Do regional trade agreements increase trade? Empirical evidence from the Asia–Pacific region. Economic Affairs, 40(3). https://doi.org/10.1111/ecaf.12435

International Trade Centre. (2026). Trade Map: Trade Statistics for International Business Development. https://www.trademap.org/Index.aspx

Kang, H., Lee, K. M., & Yang, J. S. (2024). The potential for cascading failures in the international trade network. PLoS ONE, 19(3 March). https://doi.org/10.1371/journal.pone.0299833

Matsumura, A. (2021). Gravity analysis of trade for environmental goods focusing on bilateral tariff rates and regional integration. Asia-Pacific Journal of Regional Science, 5(2). https://doi.org/10.1007/s41685-020-00189-x

Rosca, P., & Trifonova, L. (2025). Economic integration as a form of economic and social progress. Journal of Research on Trade, Management and Economic Development, 11(2(22)). https://doi.org/10.59642/jrtmed.2.2024.03

Santos Silva, J. M. C., & Tenreyro, S. (2006). The log of gravity. Review of Economics and Statistics, 88(4). https://doi.org/10.1162/rest.88.4.641

Schetter, U. (2022). A Measure of Countries’ Distance to Frontier Based on Comparative Advantage. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.4227848

Shepherd, B. (2016). Did APEC’s Trade Facilitation Action Plans deliver the goods? Journal of Asian Economics, 43. https://doi.org/10.1016/j.asieco.2016.01.003

Solís, M., & Wilson, J. D. (2017). From APEC to mega-regionals: the evolution of the Asia-Pacific trade architecture. Pacific Review, 30(6). https://doi.org/10.1080/09512748.2017.1305438

Stenberg, L. C., & Siriwardana, M. (2015). Measuring the Economic impacts of Trade Liberalisation on Forest Products Trade in the Asia-Pacific Region Using the GTAP Model. International Forestry Review, 17(4). https://doi.org/10.1505/146554815817476459

Stender, F., Berger, A., Brandi, C., & Schwab, J. (2021). The Trade Effects of the Economic Partnership Agreements between the European Union and the African, Caribbean and Pacific Group of States: Early Empirical Insights from Panel Data*. Journal of Common Market Studies, 59(6). https://doi.org/10.1111/jcms.13201

United Nations Trade & Development. (2026). Data Hub: Currency Exchange Rates, Annual. https://unctadstat.unctad.org/datacentre/dataviewer/US.ExchangeRateCrosstab

Vidya, C. T., Prabheesh, K. P., & Sirowa, S. (2020). Is trade integration leading to regionalization? Evidence from cross-country network analysis. Journal of Economic Integration, 35(1). https://doi.org/10.11130/jei.2020.35.1.10

Vu, T. T. H., Tian, G., Zhang, B., & Nguyen, T. Van. (2020). Determinants of Vietnam’s wood products trade: application of the gravity model. Journal of Sustainable Forestry, 39(5). https://doi.org/10.1080/10549811.2019.1682011

World Bank. (2026). Global Economic Monitor. https://databank.worldbank.org/source/global-economic-monitor-(gem)

World Trade Organization. (2026). Regional Trade Agreements Database. https://rtais.wto.org/UI/PublicMaintainRTAHome.aspx

Xu, H., Nghia, D. T., & Nam, N. H. (2023). Determinants of Vietnam’s potential for agricultural export trade to Asia-Pacific economic cooperation (APEC) members. Heliyon, 9(2). https://doi.org/10.1016/j.heliyon.2023.e13105