Climate change, geography and trade agreements: A perspective of Asian bilateral trade

PLOS One | https://doi.org/10.1371/journal.pone.0320363 April 25, 2025 7 / 23 PLOS One Trade agreement, climate change and geography However, this study argues that trade agreements may be sign based on geographic factors such as distance, access to Ocean, common border and so on. Methodology Theoretical framework and model After reviewing the aforementioned literature on the effect of geographic factors on international trade, we developed a theoretical framework to estimate the influence of geographic factors on bilateral exports. A number of research studies argue that countries are giving great attention to export strategies to enhance trade volume and other economic goals. Specifically, exports are influenced by several factors, such as population, agglomeration, trade blocks, distance, and so on. However, geographic factors are the most important for bilateral exports. The reason may be that trading partners are located in different locations with diverse geographic factors. More analytically, the simultaneous effect of geographic factors may also influence bilat- eral exports, indicating that the joint effect of climate change (CO2 emissions), the ocean, and common border has a remarkable effect on bilateral export levels between the trading partners. To do so, bilateral exports as dependent variables, and geographic factors, trade agreements, and economic GDP as explanatory variables are used in the current analysis. Therefore, trade agreements also affect bilateral exports by eliminating the distortions that

create the trade effect. In contrast, the imposition of distortions on member and non-member nations of any trade block creates trade diversion. Consequently, trade can be diverted from any equilibrium position. The explanations for the variables are presented. Bilateral exports from country i to coun- try j are measured in million dollars per year. The explanatory variables are Carbon dioxide (CO2) emissions are the released emissions in tons from all sectors of the economy, such as agriculture, industry, or manufacturing sectors, per year. CO2 emissions have a remarkable effect on international trade. The reason may be that these variable influences climate change and changes the atmosphere, resulting in the firm’s decisions regarding the geographic- oriented environment or atmosphere. Consequently, the bilateral export level is enhanced between the trading partners [67]. Physical distance is defined as the distance from one place (capital to capital) in terms of a kilometer of a country, i.e., Ocean access is defined as a country that naturally has access to an ocean or sea. The common border is shared by two countries by land. These are key variables that are on the right side of equation (5). Moreover, we use proxies (e.g., CO2 emissions and physical distance) to understand the concept of natural and man-made geography, which are estimated for first-nature and second-nature geography because these are the main factors of geography. In addition, trade agreements defined as a dummy variable are included in the current

model, if two member countries sign a preferential trade agreement is equal to one, otherwise zero [68] also argues that trade agreements (i.e., preferential trade agreements) are used for trade creation effects among the member countries. A number of studies investigated the potential trade diversion effects of preferential trade agreements by using the binary variables [69]. Therefore, member countries reduce trade restrictions such as tariffs and quotas to enhance trade volume. Thus, it is expected to have a positive effect on bilateral exports. Model estimation ln EXP ln CO ln PhyDIST ln AOij ln C ijt it ij ( ) = + ( )+ ( )+ ( )+ β β β β β 0 1 2 3 4 2 BB ln GDP ln Pop ln distance tariff ij it it it ( ) + ( )+ ( )+ ( )+ + β δ δ δ ε 5 1 2 3 iit (1)