Do Trade Agreements and Economic Unions Create Clusters in Global International Trade?

This paper employs a gravity model to assess the role of ex-post regional trade agreements and customs unions on trade patterns. The primary contribution of this paper to the conventional gravity modal is to embed trade agreements and determine whether they have significantly affected bilateral trade. The secondary contribution is to reveal intra and inter-union/agreement trade patterns among trade agreements and economic unions. Three dummy variables were also introduced to the conventional gravity model. Results showed a slight clustering in trade partners (a) depending on the distance and (b) depending on being a member of a trade agreement and/or economic union.