Traditional gravity variables are present in the analysis as control variables. We insert GDP as a control variable for the indication of a country`s economic performance. In terms of bilateral trade flows, the exporting country`s GDP plays a key role in trade flows, but with a smaller share than that of the importing country. The population also has an impact on bilateral trade flows. A large population is a large consumer market, a large labour force and therefore low-cost production, resulting in increased trade flows. The effects of the population on bilateral trade flows are positive for exporting countries, while they are negative for importing countries. In the gravity model, distance is essential for the commercial flow between two or more countries. Countries prefer to negotiate with their closest neighbours than with distant countries, due to high transport costs and other determinants of commodity prices. Kee HL, Nicita A, Olarreaga M (2009) Estimated trade restriction indices. Econ J 119 (534):172-199 Campi M, Dueaas M (2019) Intellectual property rights, trade agreements and international trade. Res Policy 48 (3):531-545 Founded for the first time by Tinbergen (1962), Followed by Pulliainen (1963) and P-ykonen (1963), and then by Linnemann (1966), the gravity model is known in its traditional form of predicting bilateral trade flows on the basis of economic sizes, often using GDP measures and the gap between two units.
According to Bergstrand (1985), the log-linear equation typically indicates that the flow from origin i to objective j can be declared by the economic forces behind trade flows, by the economic forces at destination and by the economic forces that support or resist the movement of origin. The approach uses a gravity model based on bilateral trade flows. For this analysis, it is expressed as follows: the study broadened the analysis by examining four specific groups of trade policy. The finding confirms the analyses of precedents with a positive and statistically significant correlation between NTBj and exports and a negative correlation between EPSj and imports. While COSTj and FTA were positive and significant for the export model, COSTj and FTA were not significant for the import model. We also verify the validity of the results obtained by estimating different groups of countries by geographic or organizational group. In high-income countries (OECD), the NTB has a positive influence on trade, while NTBs between Gulf and Asian countries such as India influence trade between these countries. These results differ from group to group. This proves that trade policy influences Pakistan`s trade with these key partners, but the degree of influence depends on the geographical location and organization of which the trading partner is a member. In all cases, stringent environmental policies and high costs for goods and services reduce trade flows between Pakistan and its partners.