REGIONAL TRADE AGREEMENTS AND GLOBAL VALUE CHAINS: IS THERE ANY CONNECTION BETWEEN THESE BACKBONE TRENDS OF WORLD ECONOMY?

Abstract

World economy transformations related to backbone trends such as global value chains (hereinafter – “GVCs”) and the intensification of regional trade contribute to an active change in economic geography. However, there is no common approach to assess the relationship between the Regional Trade Agreements (hereinafter – “RTAs”) and GVCs. Some researchers suggest that the inclusion of companies in the stages of production is determined by economic expediency only and does not depend on the integration policy of countries. Nevertheless, theoretical background and empirical analysis make it possible to come up with a hypothesis that the elimination of barriers to the movement of goods, services and factors of production, provided by regional integration, contributes to the inclusion of countries in regional and global value chains. In the present article, quantitative analysis based on the Gravity model of trade was used, which evaluates the relationship between regionalization and the participation of countries in value chains on the example of the EU, to support this statement. Calculations show that European integration facilitates the development of regional industrial cooperation, while non-tariff restrictions adversely affect the development of GVCs. At the same time, the analysis of actors with economic asymmetries, such as Eurasian Economic Union and MERCOSUR, shows that in some cases the conclusion of RTA is not enough and wider cooperation in economic integration is needed for the purpose of GVCs promotion. Thus, this study illustrates that regional economic integration supported by RTAs can be a tool for integrating economies into the transnational production system.