Free Trade Agreements and the SADC Economies

Countries in southern Africa have engaged in a variety of tradeliberalisation initiatives such as the European Union (EU)–SouthAfrica Free Trade Agreement (FTA), the EU's ‘Everythingbut Arms’ (EBA) initiative to eliminate trade barriersagainst imports from the least developed countries and a potentialFTA among Southern African Development Community (SADC) countries.In this paper we use a multi-country computable general equilibrium(CGE) model to analyse the impact of trade liberalisation inthe region. First, we analyse the FTA between South Africa andthe EU. Then, we consider how the rest of southern Africa mightrespond: (i) by enforcing an SADC FTA; (ii) by exploiting theadvantages of unilateral access to the EU in addition to anSADC FTA; and (iii) by entering an FTA with the EU and otherSADC countries. The scenarios are ordered such that the SADCcountries pursue increased trade liberalisation. We find thatunder all FTA arrangements the increased total imports fromFTA partners exceeds the reduction in imports from non-FTA partners— the FTAs examined are all net trade creating. Some SADCeconomies are slightly hurt by the FTA between the EU and SouthAfrica, while others gain slightly. Overall, the agreement isnot a beggar-thy-neighbour policy. We also find that unilateralaccess to the EU is more beneficial for SADC countries thanan SADC FTA because the SADC countries trade more with the EUthan with each other. However, reciprocal reforms under an EU–SADCFTA dominate unilateral access to the EU because they requiremore structural adjustment in the SADC countries. Finally, wefind that South Africa is not large enough to serve as a growthpole for the region. Access to EU markets provides substantiallybigger gains for the other SADC countries than access to SouthAfrica.     

Exporter responses to FTA tariff preferences: evidence from Thailand

This paper focuses on how exporters respond to free trade agreement (FTA) preferential schemes by analysing the administrative records of FTA implementation at the product level in Thailand. The key finding is that while there is growth in the number of FTAs with a potentially larger membership than existing FTAs, firms tend to prioritise existing FTAs. Moreover, only a narrow range of products are involved in applications for FTA preferential schemes. As a result, only one‐third of exports are covered by such arrangements. The key determinants of firms applying for preferential schemes include tariff margins, the ability to comply with rules of origins (ROOs) and the economic fundamentals influencing trade. Hence, it is less likely for FTAs to open up export opportunities for products that are either yet to be traded or of low prospective trade volume. Estimates of the costs of complying with ROOs average 8.6 per cent of tariff equivalence. The cost approaches zero for developed countries but is substantially higher for developing nations. The key policy inference is that the export‐enhancing effects of FTAs are passive at best, working only after economic fundamentals are established. For us to harness the trade‐inducing effects of FTAs, reducing costs incurred from the presence of ROOs from both exporting and importing countries should be the prime focus.     

欧盟与东盟FTA谈判新动向及中国的对策

欧盟与东盟FTA谈判的意图是奉行开放的区域经贸合作政策,抵消贸易转移效应,增强在亚洲地区的影响力。中国应该密切跟踪研究欧盟介入亚洲区域经济一体化进程的新动向,必要时可以主动提出与欧盟进行FTA谈判,使区域一体化进程向有利于中国的方向发展,遏制欧盟的贸易保护主义倾向。     

The determinants of FTA use in Southeast Asia: A firm-level analysis

The spread of free trade agreements (FTAs) in Southeast Asia has ignited a debate about their impact on enterprises including the business costs from the Asian ‘noodle bowl’ effect. This paper undertakes a comparative and firm-level analysis of the determinants of FTA use in Indonesia, Malaysia and the Philippines. The likelihood of firms using important ASEAN+1 FTAs (e.g. the ASEAN-China FTA, the ASEAN-Japan FTA and ASEAN-Korea FTA) is positively associated with acquiring knowledge about FTAs, building technological capabilities, and membership in industrial clusters. Non-use of FTAs is explained by a lack of information about FTAs and the absence of FTAs with major trading partners. Key policy implications are the need to improve business support for FTAs, to conclude FTAs with major trading partners, and to create a database on FTA preference use.     

On the bilateral trade effects of free trade agreements between the EU-15 and the CEEC-4 countries

The expansion of regionalism has spawned an extensive theoretical literature analysing the effects of free trade agreements (FTAs) on trade flows. In this paper we focus on FTAs (also called European agreements) between the European Union (EU-15) and the Central and Eastern European countries (CEEC-4, i.e. Bulgaria, Hungary, Poland and Romania) and model their effects on trade flows by treating the agreement variable as endogenous. Our theoretical framework is the gravity model, and the econometric method used to isolate and eliminate the potential endogeneity bias of the agreement variable is the fixed effect vector decomposition (FEVD) technique. Our estimation results indicate a positive and significant impact of FTAs on trade flows. This finding is robust to the inclusion in the sample of a group of control countries (specifically Belarus, the Russian Federation and the Ukraine) that did not sign an FTA. Besides, we show that trade growth after the FTA agreement with the EU was signed exceeded trade growth of the control group of countries, which did not become members.

日本积极推进FTA/EPA的政策措施

日本政府自世纪之交修改WTO一边倒的贸易政策,实施以WTO为中心,同时推进双边自由贸易、地区自由贸易和多边自由贸易的新贸易政策以来,近年来又把自由贸易的重点一步一步地倾向以东亚为中心的双边自由贸易,与美国、欧盟的EPA也提上了议事日程。为此,日本政府在提高FTA/EPA的紧迫感、加快FTA/EPA谈判的同时,还制定EPA行动计划,建立专门的组织机构,加强统一领导和统一协调,进行官产学共同研究,争取国民的理解和支持,积极开展ODA外交,加快农业改革,克服贸易自由化主要的障碍,积极推动了其以东亚为中心的FTA/EPA的迅速发展。     

Do Free Trade Agreements Increase the New Goods Margin? Evidence from Korea

We analyze the changes in the composition of bilateral trade—and more specifically, in the new goods margin—following the free trade agreements (FTAs) signed by Korea between 2004 and 2008. We find that new goods trade increased disproportionately after the FTAs came into effect, and that least-traded goods (LTG)—those accounting for the lowest 10% of trade prior to the FTAs—ended up accounting for 37% of post-FTA trade with FTA partners. In contrast, the corresponding share for a comparable group of countries that did not sign FTAs with Korea was only half as large, averaging close to 20%. We also find that only less than 2% of all least-traded products accounted for most of the growth in LTG trade, and that those goods tended to be clustered in the same industries as the intensively-traded goods. Furthermore, a larger fraction of LTG became heavily traded for the case of FTA partners than for non-FTA countries. Finally, we find evidence that least-traded imports were subject to higher pre-FTA tariff protection than other products.     

Impacts of Sequential Free Trade Agreements in East Asia: A CGE and Political Economy Analysis

Abstract

This paper estimates the economic impacts of the various sequential liberalization scenarios in East Asia, emphasizing the significance of the “sequence” of the liberalization process in computable general equilibrium (CGE) analysis. The major findings are as follows: (1) “Sequence” matters in measuring the economic impacts of free trade agreement (FTA) scenarios in the region; (2) Scenario 1 (Korea-China FTA → Korea-Japan FTA → China-Japan FTA) is the sequence maximizing Korea's economic gains, whereas Scenario 3 (Korea-China-Japan FTA) is the one most preferred economically by China and Japan; (3) Korea's FTAs with the United States (US) and European Union (EU) can be evaluated as a preemptive strategic move, causing changes in FTA preferences of Korea and Japan; (4) the prediction of Bond and Baldwin (adjustment cost and juggernaut effect) and that of Evenett et al. (trade diversion effect) are supported by the empirical results that Korea's (China's) expected gains from northeast Asian FTA sequences increase (decrease) after Korea's FTAs with the US and EU are made; (5) predictions about the International Political Economy (IPE) theories (power consideration and domestic politics) upon the sequential FTA formations in East Asia are consistent with the findings above.     

Trade creation and the status of FTAs: empirical evidence from East Asia

East Asia has been considered a latecomer with respect to Free Trade Agreements (FTAs). Since the turn of the last century, however, FTAs with East Asian participation have seen an intra- and extra-regional expansion. Many trade initiatives have been proposed, negotiated or even implemented. This introduces interesting perspectives for the analysis of trade agreements regarding their anticipatory trade effects. This paper focuses on the trade impact of FTAs at different stages that East Asian economies participate in. The central part of this study is an econometric analysis that applies panel data to the gravity model of international trade flows. We augment the traditional model with variables to estimate trade effects of bilateral and multilateral agreements and year-to-year changes in the stages of their implementation. Our results reveal that there exist anticipatory effects preceding the actual implementation of bilateral FTAs with East Asian participation. Further, anticipation effects are larger for bilateral than for multilateral agreements, possibly because the realisation of bilateral agreements is considered more realistic.     

Vertical trade and free trade agreements

We investigate the effects of free trade agreements (FTAs) on tariffs and welfare in vertical trade. We consider a three-country model, where an FTA is formed between a country exporting a final good and a country exporting an intermediate good. The FTA unambiguously leads to a reduction in the member country’s tariff, but may cause the non-member country’s tariff level to increase. In the case, where FTA raises the non-member country’s tariff level, the FTA increases that country’s welfare. In contrast, the FTA may render its member countries better off. This result implies that the formation of an FTA may not always be Pareto-improving.     

Assessing the economic impacts of the EU-Singapore FTA with a dynamic general equilibrium model

Negotiations for the EU-Singapore FTA were concluded on December 6, 2012. Given that this is the EU’s first FTA with an ASEAN member country and the second one with a major Asian trading partner after the conclusion of the EU-Korea FTA, this agreement paves the way for future FTAs with countries in the region. The goal of this paper is to quantify the economic impacts of the EU-Singapore FTA using a dynamic computable general equilibrium model. The resutls estimated in this paper suggest that the bilateral reduction of tariff and non-tariff barriers brings benefits for both sides: Singapore GDP is expected to increase by € 2.7 billion whereas the EU gains are assessed at € 550 million. In addition, EU exports to Singapore would rise by some € 1.4 billion and Singapore’s exports to the EU by some € 3.5 billion. In a complementary scenario, the current paper also assesses the value of this FTA as an insurance policy against any hypothetical tariffs hikes in Singapore to WTO bound levels. In such a “worst case” scenario, the EU-Singapore FTA will protect EU GDP from a decrease of € 350 million and prevents a loss of € 3.7 billion EU exports to Singapore.     

Do trade agreements increase Vietnam's exports to RCEP markets?

The paper reviews recent developments in trade relations between Vietnam and members of the Regional Comprehensive Economic Partnership (RCEP) agreement, and analyses the impacts on Vietnam's exports of tariff reductions in RCEP trading partners. The margin of tariff preferences is adopted as a proxy for the degree of trade liberalisation and a gravity model is used to assess the impacts of the tariff preferences under the AFTA and ASEAN+1 FTAs on Vietnam's major exports. The results show that the effects of tariff preferences differ between the types of preferences and products. The FTA tariff preferences do not exert a stimulating effect on the export of agricultural products but they have positive effects on several manufacturing exports such as garments and footwear.     

Regional integration in Asia and its effects on the EU and North America

Consequences of free-trade agreements (FTAs) among the ASEAN+3 and ASEAN+6 countries are explored using a dynamic computable general equilibrium (CGE) model. Quantitative assessments of intra- and extra-regional effects on welfare, trade and output are offered. When both trade facilitation and endogenously determined productivity are included in the FTA scenarios, Singapore, other ASEAN countries and China would be able to realize relatively large welfare gains, while the welfare effects on the EU and North America are negligible. The trade and output effects on the latter two regions are also relatively small, with the notable exception of crops, other than rice, in North America.     

Effects on China and ASEAN of the ASEAN-China FTA: The FDI perspective

The ASEAN-China FTA (ACFTA) is a significant step in regional economic integration for both China and the ASEAN countries. While analysis of the effects of Free Trade Agreements (FTAs) most commonly focuses on the trade effects, the closeness of the link between trade and investment implies that the effect of an FTA on foreign direct investment (FDI) is also potentially significant. FTAs may stimulate FDI through the effects of market expansion and vertical fragmentation, while they may also reduce FDI through a plant rationalization effect. The overall effect of an FTA on FDI flows is an empirical question. This paper examines the impact of ACFTA on FDI flows through an econometric model that captures the influence of East Asian production networks on FDI, which we expect to be an important explanatory factor. The model finds that ACFTA has a significant and positive effect on FDI flows. A brief survey of the theoretical literature on the welfare and other related effects of FDI serves to emphasize that the extent to which individual member countries of the ACFTA will benefit from this increase in FDI will depend in important ways on the policies pursued in each country.     

Free trade agreements and world obesity

We study the causal link between trade openness via free trade agreements (FTAs) and obesity rates. When applying a difference-in-differences approach by exploiting the year a country entered a free trade agreement with the United States during the period 1990–2016. We find a positive and causal impact of FTAs on obesity rates, which are statistically and economically significant. We show that our findings are robust to placebo tests, the use of synthetic control methods, and a maximized sample. Furthermore, we show that when using an event studies approach the equal trends assumption holds.     

Belt and road: The China dream?

This paper explores the impact of the Belt and Road Initiative (BRI), in terms of changes in trade costs on trade and consumer welfare in China, the EU, and the rest of the World. We employ a general equilibrium structural gravity approach and conduct a counterfactual analysis. Our key findings are as follows: (i) China and the EU are expected to make substantial gains from the BRI due to reductions in transport costs; (ii) signing and implementing a deep FTA between China and the EU is equivalent to transport cost reductions of 15–20%; (iii) the joint policy of the BRI and FTA is super-additive, magnifying the gains from the separate policies; and (iv) where transport cost reductions are 20% or more, the potential negative effect of the China-US trade war on China is more than compensated for by the BRI initiative. Our results provide evidence that the BRI has the potential to deliver significant welfare gains, particularly if combined with other trade integration schemes, and to counterbalance aggressive trade policies.     

评欧盟全球贸易新战略

2006年10月4日,欧盟委员会公布了一个题为《全球的欧洲:在世界中的竞争》报告。该报告阐述了欧盟全球贸易新战略。欧盟全球贸易新战略的目的就是通过对外贸易政策的实施,来实现欧盟的经济增长和就业增加。欧盟确定把区域或双边自由贸易协定作为实现经济增长和就业增加的一个战略平台。亚洲将是欧盟选择自由贸易协定谈判对象的主要地区。欧盟的全球贸易新战略与美国小布什倡导的"竞争性自由化"战略如出一辙。由于自由贸易协定在本质上偏离了WTO所倡导的非歧视原则,所以,欧盟与美国的做法将对多边贸易体制产生消极影响。中国面对美国、欧盟甚至是日本展开的一系列自由贸易协定谈判,应该作出应有的反应。     

自由贸易区贸易效应研究方法综述

区域经贸合作已成为各国协调贸易政策的主导力量，尤其在2000年以后，区域经济自由化的发展对区域贸易效应产生了很大的影响。因此，本文就FTA贸易效应的研究方法及其研究结果进行了总结，以便为进一步的研究提供参考。     

China＇s Free Trade Agreements with ASEAN, Japan and Korea： A Comparative Analysis

The role of China in East Asia's recovery from the recent global financial and economic crisis highlights China's position as an engine of growth for this region. From the viewpoint of China, there are many potential gains from entering into free trade agreements (FTAs) with its neighbors, who collectively form a large and fast‐growing market. In this paper, we qualitatively and quantitatively assess the four main permutations of China's FTAs with East Asian major economies: China–ASEAN, China–Japan, China–Korea and ASEAN+3. We compare the effects of these FTAs on China's output and welfare. Our comparative analysis shows that China will gain from all three bilateral FTAs, while gaining the most from the ASEAN+3. Because forming a region‐wide FTA, such as the ASEAN+3, is expected to be gradual and difficult, China should continue to engage in bilateral FTAs as a medium‐term and alternative strategy. However, in the long term, China should pursue a region‐wide FTA.     

日本FTA/EPA的新发展与中日FTA难以启动的对策

世界经济区域化、一体化正进入以双边自由贸易为主,多层次自由贸易同时发展的新阶段。日本政府修改了"WTO一边倒"的对外贸易战略,对双边自由贸易采取了越来越积极的态度,与各国家和地区缔结FTA/EPA的进程明显加快,日美、日欧FTA也提上了议事日程。相比之下,中日FTA不仅在日本FTA战略中被放在了次要的地位,而且在中国政府主动倡导中日FTA以后,日本政府也没有积极地回应。日本政府对中日FTA的消极态度违背了其发展双边自由贸易的宗旨,不利于中日两国的共同利益,不利于东亚自由贸易区和东亚共同体的发展。中国应该利用中日关系转暖的有利时机,继续倡导和推动中日FTA。