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

VARIABLES Dependent Variable: Exportsijt CO2 -0.355 0.376** 0.327*** 0.167 0.352*** 0.069** (0.245) (0.151) (0.054) (0.119) (0.046) (0.030) Physical-distance 0.145 0.330*** 0.428*** 0.186 0.379*** 0.249*** (0.201) (0.121) (0.010) (0.143) (0.050) (0.007) Lndistance -0.891*** – – -1.239*** – – (0.176) – – (0.168) – – Access to Ocean 0.751*** – 0.622 3.006*** 1.553*** 1.308*** (0.044) – (0.386) (0.039) (0.282) (0.032) Common border 2.627*** 0.117 0.742*** 1.497*** 0.704*** 0.854*** (0.401) (0.201) (0.035) (0.283) (0.166) (0.034) LnGDP -0.107 – – 0.572*** – – (0.094) – – (0.192) – – Lntariff -0.124 -0.214*** -0.189*** -0.340*** -0.328*** -0.257*** (0.076) (0.056) (0.011) (0.071) (0.053) (0.011) Lnpopulation -0.097 -0.122*** -0.089*** 0.314*** 0.104*** 0.122*** (0.511) (0.030) (0.009) (0.077) (0.027) (0.008) Remoteness – -3.875 -6.335*** – 0.002*** 0.001*** – (3.875) (1.970) – (0.030) (1.120) Lambda – 0.242 – – 0.740*** – – (0.381) – – (0.275) – – – – – – – Constant 24.970*** -8.564 -8.226 -3.486 1.294 -8.327*** (8.947) (13.700) (6.104) (2.728) (1.941) (0.398) Observations 44436 44436 44436 44436 44436 44436 R-squared 0.145 0.104 – 0.449 – – Number of exporter – 46 46 – 46 46 Note: the term ***, ** and * denote that significance level at 1%, 5% and 10% respectively. Ln indicates logarithm for variables. https://doi.org/10.1371/journal.pone.0320363.t006

PLOS One | https://doi.org/10.1371/journal.pone.0320363 April 25, 2025 15 / 23 PLOS One Trade agreement, climate change and geography existed. Previous studies (e.g., Hussain et al., 2020; Friel et al., 2020) also confirm our findings, and argue that trade agreements have a remarkable impact on bilateral exports between the trading partners. In addition, WTOx provisions are positively incline towards bilateral exports. To avoid collinearity, each provision is investigated separately by not examined into single equations. However, each estimation has been measured with a dummy variable, suggesting that whether a PTA endures or not. The results demonstrate that the coefficient of capital mobility (CPM) clause in PTA has positive and significant impact bilateral exports, which implies that a 1% increase in CPM upsurges bilateral exports by 24.2% and 32.1% for exporting and importing countries models respectively. Subsequently, the coefficient of competition policy (CPP) has also significant positive impact on bilateral exports. It implies that 11.1% bilateral exports are increased due to a 1 percentage change in CPP for exporting countries model. Conversely, a 1% change in CPP upsurges bilateral exports by 9.1% for importing countries model. Labor mobility (LMB) provisions stimulate bilateral exports approximately 19%, suggesting that pro- vision of facilities for movement cause an increase in export volume. It is worth notable that migration stock variable added as control variable and isolates the certain outcomes of labor

mobility. Conversely, bilateral exports are increased about 17.3% due to a one-percentage point in LMB. The magnitude of environmental standards (EVS) has also positive effects on bilateral exports, which implies that 20.1% and 13.1% bilateral exports are due to one unit change in EVS for exporting and importing countries models respectively. The outcomes suggest that environmental standards in PTAs persuades efficiency, innovation and business effectiveness, ensuing in exports. Considering the simultaneous effect of GDP and CO2 emissions, the coefficient of inter- action term (GDP*CO2) adversely affect the bilateral exports. This implies that a 1% change in GDP*CO2 reduces bilateral exports by 3.5% in the case of domestic geographic countries. On the contrary, the outcomes for the case of partner geographic countries also confirm the negative correlation with bilateral exports; a 1.3% decrease in bilateral exports is due to a 1% change in interaction terms. This suggests that economic GDP and CO2 emissions are simul- taneously deteriorating bilateral exports. The reason may be that an increase in economic growth causes carbon dioxide emissions, resulting in extensive production and consumption levels that directly or indirectly affect bilateral exports based on geographic locations. Fur- thermore, the marginal impact of bilateral exports with respect to CO2 emissions is positive for bilateral exports. The outcomes indicate that a 1% increase in economic GDP increases the marginal impact by 14.1%, suggesting that CO2 emissions affect bilateral exports through

economic GDP over time. Robustness checks. Geographical factors could also be determined by trade, the presence of natural resources, and human economic activities. Thus, the potential reverse causality problem could be presented. However, the large investment in human and natural geography to create economic activities and discover natural resources can provide great returns to countries through production and export channels. The expectations of causality on the side, export level, and export probability can be directly influenced by geographic factors compared with other ways [70,88]. The indicators of geography do not greatly change their values concerning time, especially natural factors, reflecting that any unexpected change in geographical factors has not happened because of export flow. Thus, we report the potential endogeneity issue by exploiting the lack of geography as a new measurement of distance. Our analysis deals with heteroscedasticity (constant elasticity models) and checks the consistency of the baseline estimate with OLS and the pseudo-maximum likelihood estima- tor, as suggested by [89–91]. They explain that the lowest bias is produced by the Poisson Pseudo-Maximum Likelihood (PPML) for several heteroscedasticity patterns. The results are

PLOS One | https://doi.org/10.1371/journal.pone.0320363 April 25, 2025 16 / 23 PLOS One Trade agreement, climate change and geography reported in Table 7 for the robustness check. The replacement of the core gravity variable, distance, with a new measurement scale indicates the same results with the minor changes in magnitude as estimated in a simple regression. The remaining gravity variables do not change. Column (6) reports that all geographic variables are positive, with the exception of physical distance. Physical distance as a geographical factor has a high impact on exports. Export volume is highly affected because of the great magnitude of domestic and partner countries’ populations and GDPs. Columns 2 and 5 report the estimate of PPML. All geographical factors expect positive signs and are statistically more significant than domestic CO2. Domestic countries that have access to the Indian or the Pacific Oceans remain significantly negative compared with partner countries. The variable tariff imposed by domestic countries on trade policy has expected signs. The world’s GDP is found to be greater in magnitude in domestic geography than in partner countries’ geography. Table 7. Robustness Checks. Exporting Countries Importing Countries Estimation QREG PPML 2SLS New Variable PPML 2SLS (1) (2) (3) (4) (5) (6) VARIABLES Dependent Variable: Exports CO2 -0.325 -0.767*** 1.069 -0.327*** 0.259*** 7.399 (1.494) (0.073) (3.447) (0.048) (0.170) (21.410) Physical-distance 0.552*** 0.209*** 0.939 0.117*** 0.008*** -0.086

-0.325 (3.720) (0.878) (0.018) (8.970) (3.986) LnGDP 0.444*** 0.548*** 0.466 0.681*** 0.663*** 4.628 (0.055) (1.880) (0.800) (0.019) (9.180) (9.142) Lntariff -0.366*** – -0.032*** -0.023*** -0.018*** – (0.022) – (3.040) (0.003) (1.440) – Lndistance -1.023*** -0.712*** – – -0.634*** – (0.038) (7.240) – – (6.820) – Access to Ocean -0.004 – – 2.845*** – – (0.609) – – (0.040) – – Common border 2.381*** -0.179*** – 3.456*** 0.106*** – (0.109) (1.730) – (0.071) (1.750) – Lnpopulation 0.789*** 0.583*** – 0.182*** 0.0417*** – (0.233) (5.510) – (0.015) (5.240) – Lntotal distance – – – -0.302*** – – – – – (0.054) – – Lnworld GDP – – 707.1 * – – -3.065 – – (6.600) – – (6.573) Constant – – -22,418 * -6.808*** – 6.873 – – (13.521) (0.973) – (2.757) Observations 44436 44436 44436 44436 44436 44436 R-squared 0.405 0.104 – 0.328 – – Number of exporters – 46 – – 46 – Note: the term ***, ** and * denote that significance level at 1%, 5% and 10% respectively. Ln indicates logarithm for variables. https://doi.org/10.1371/journal.pone.0320363.t007

PLOS One | https://doi.org/10.1371/journal.pone.0320363 April 25, 2025 17 / 23 PLOS One Trade agreement, climate change and geography Conclusion This study investigates the effects of geographic factors, climate change and trade agreements on bilateral exports for Asian countries. To do so, we use the panel dataset for Asian countries period from 2000 to 2020 by employing the augmented gravity model. Findings demonstrate that countries better utilize the natural and man-made economic activities for the bilateral exports among their trading partners. More specifically, GDP and geographic factors are complementary in determining the export level and probability in both locations. Besides, the marginal impact of natural and man-made activities concerning the GDP is positively affected by adding the interaction terms in the model. The marginal export level and marginal export probability concerning the geographic fac- tors are greater than zero because of the additional change in natural and human-made eco- nomic activities. Countries that have access to the Indian or the Pacific Ocean and common borders can increase the export level and its probability between bilateral trading partners through establishing the transport infrastructure. Conventional gravity variables, such as the GDP and distance or remoteness, including control variables, have positively and negatively impacted bilateral exports and their probability, respectively. Remoteness reduces the export level in terms of charging high trade costs or transportation movement prices but presents it

differently in the countries. Thus, the countries must improve their natural and man-made economic activities through optimal allocation to enhance the export level and probability at above average. In addition, this study probes that whether preferential trade agreements are favorable or unfavorable to bilateral exports. PTAs are extensively diverse and difficult to treated any more in the empirical research as a homogenous variable, the reason may behind that expansion in international trade development, inclusion of new innovation and geographic factors and so on. Therefore, the clauses of WTOx namely labor mobility, capital mobility, competition policy and environmental standards were investigated, suggesting that each clause has positive impact on bilateral exports. Besides, climate change (CO2 emissions) has also positive impact on bilateral exports through three effects, scale effect, technique effect and structural effect. It is worth notable that exports can be increased after signing the trade agreements with regards climate change between the trading partners. Policy implications We recommend policy implications: countries should productively utilize 196% on average their natural resources to enhance bilateral exports through the infrastructure connectivity in Asia. Countries with the largest land area should focus on mountains, deserts, temperature, and climate changes in terms of land use for developing a trade-related environment. For instance, China, Russia, Indonesia, India, Pakistan, and Iran should adopt strategies related

to geographic factors (e.g., reduction CO2 by 10.2%), provide better facilities at cross borders, and develop multilateral projects. Asian countries who share a common border can benefit from bilateral exports but require better facilities and must utilize geographic endowments. Similarly, Asian countries with islands or do not share borders, such as Sri Lanka, the Mal- dives, Japan, and the Philippines, must focus on 168.9% facilities concerning access to the ocean (seashore or ports). Findings further suggest that natural geographic factors should be improved by 16.325% (estimated by structural gravity technique), resulting in relatively low magnitudes in domestic and partner countries. In the location of geographic factors in domestic (exporter) countries, export levels are affected because of country characteristics. In contrast, man-made geo- graphic factors seem to have a relatively high impact. This suggests that man-made economic

PLOS One | https://doi.org/10.1371/journal.pone.0320363 April 25, 2025 18 / 23 PLOS One Trade agreement, climate change and geography activities are well performed compared with natural economic activities to increase the export level between Asian trading partners. Climate change (CO2 emissions) has 528% (estimated by simultaneous approach) detri- mental effects on the ecosystem and are deteriorating the global environmental quality grad- ually. Despite their environmental effects, CO2 emissions also have a remarkable impact on international trade approximately 167.6% on average, particularly bilateral exports. Countries should sign trade agreements and formulate the policy regarding geographic-oriented CO2 emissions, indicating that the effects of CO2 emissions are diverse from country to coun- try, region to region, and geographic landscape. Consequently, bilateral exports are affected (which means that firms make decisions for production and export strategies based on CO2 emission affected areas), and trade agreements are also changed in their terms and conditions in nature. Countries should control 10.7% economic growth that causes increase in CO2 emissions through scale effect. However, structural effect can reduce CO2 emissions through advancement in technology, which can lead bilateral exports between the trading partners. In addition, PTAs, plurilateral trade agreements, WTOX clauses should be signed by each trading countries to augment 14.23% export level. More precisely, all trade agreements should

ably effect the bilateral exports by reducing the transportation costs, enhance the access to the suppliers, technology spillover, quality of the product and so on. Furthermore, market access (product or service selling ability of the company) and production costs (expenses are bearded by the producers) can have substantial influence on bilateral exports. The reason may behind that these factors drastically improve the efficiency and productivity of the export-oriented firms and companies. Thus, we can expect future research to cover land area by mountains, deserts, and seashores, which can be estimated to determine international trade, and the pres- ervation of natural resources, market access, and man-made skills as substantial factors for economic development through trade channels. Author contributions Conceptualization: Zahid Hussain. Data curation: Qianxu Liang. Formal analysis: Qianxu Liang, Zahid Hussain, Chaonan Wang. Funding acquisition: Qianxu Liang.

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