Firm size-specific trade effects of regional trade agreements: Estimating extensive and intensive margins of trade

We estimate the impacts of Korean firms’ participation in regional trade agreements (RTAs) on the extensive and intensive export margins by identifying exporting firms based on their firm size—small and medium-sized enterprises (SMEs) and large enterprises (LEs) at the 5 399 HS six-digit commodity level—and specifying characteristics of RTAs from 2004 to 2015. We apply the EK Tobit estimation technique to control zero trade and the OLS estimation with importer-product and time fixed effects to alleviate the endogeneity problem. We find that firm size, product type, and depth of RTA significantly matter. Specifically, we find that deeper RTAs with larger, developing, and closer members significantly enhance the export creation effects of SMEs and LEs. Regarding the firm size-specific effects, we find that SMEs are less sensitive to exploiting RTA participation but more sensitive to the import market size, bilateral and relative trade costs, and the RTA characteristics. LEs’ export creation is mainly driven by the intensive margin, while SMEs’ export creation is driven by extensive and intensive margins (slightly more by the extensive margin). For the product-specific effects, we find that Korea's major exportable products such as chemicals, basic metals, motor vehicles, and transport equipment generate significantly strong export creation effects for both LEs and SMEs through their participation in RTAs.     

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.     

Genetic distance,cultural differences,and the formation of regional trade agreements

Review of World Economics - Genetic distance between countries’ populations has been shown to proxy cross-country differences in cultures and preferences. In an unbalanced panel of 133...     

Have Asian trade agreements reduced trade costs?

Regionalization of trade in East Asia increased in the 1990s, and has been accompanied by a growing number of trade agreements. The wave of trade agreements is in part a response to the need to facilitate trade in order to make regional value chains more profitable. This paper draws on a rich Australian database for the period 1990–2007, which allows us to control for distance and commodity characteristics and to identify cross-country variation in trade costs. The results, indicating the extent to which East Asian countries’ trade costs have fallen over the regionalization period relative to changes in other regions’ trade costs, provide evidence of the existence of effective policy steps to facilitate trade and also that these steps have multilateral as well as bilateral or regional benefits.     

Do regional trade agreements really help global value chains develop? evidence from Thailand

This paper examines the firm-level nexus between exporting and importing by using firm-level data from Thai customs. We differentiate firms’ imports according to the tariff regime used (e.g. regional trade agreements (RTAs)). Our finding is that imports under RTA regimes are not considerably associated with exports. Rather, greater exports are found in firms with larger imports under the most favoured nation or other preference regimes (e.g. duty drawback for raw materials imported to produce export products). One reason for the result in RTA imports is that active RTA importers mainly target the domestic market rather than the export market. If the main market is abroad, firms tend to use other preference regimes. Thus, the other preference regimes may contribute more greatly to the development of firm-level back-and-forth international transactions than RTAs do.     

Preferential trade agreements and the structure of international trade

In this paper we examine the impact of membership in preferential trade agreements (PTAs) on trade between PTA members. Rather than considering the impact of PTA membership on the volume of trade we consider the impact of membership on the structure of trade. For a large sample of countries over the period 1962–2000 we find that membership in a PTA is associated with an increase in the extent of intra-industry trade. Our results indicate that this is especially the case for PTAs formed between richer countries, with the effects of PTAs between poorer countries found to be smaller.     

Preferential trade agreements and their role in world trade

This paper investigates the effects of preferential trade agreements (PTAs) on bilateral trade using a comprehensive data base of PTAs in force and a detailed matrix of world trade. Total trade between PTA partners is a poor proxy for preferential trade (trade in tariff lines where preferences are likely to matter): while the former was one-third of global trade in 2000–2002, the latter was between one-sixth and one-tenth. Gravity model estimates indicate that using total trade to assess the impacts of PTAs leads to a significant downward bias in the PTA coefficient: the semi-elasticity of trade with respect to PTA membership rises from 87% for total trade to 119% for preferential trade. Product exclusions and long phase-in periods significantly limit preferential trade; the marginal impact of South-South agreements on preferential trade is much higher than North-South PTAs, while the effect of North-North agreements is insignificantly different from zero.     

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.     

Towards new agreements on international trade liberalization

Zusammenfassung Zu neuen Abkommen über Liberalisierung des internationalen Handels. — Die Vielfalt der nichttarif?ren Handelshemmnisse steht ihrem allgemeinen und linearen Abbau—analog den Zollverhandlungen der Kennedy-Runde — bislang entgegen. In der vorliegenden Studie wird daher vorgeschlagen, für jedes Land einen ?Zolltarif der nichttarif?ren Handelshemmnisse? zu berechnen, indem auβertarif?re Maβnahmen in Form von Zoll?quivalenten quantifiziert werden. Dabei ist die zentrale Hypothese, daβ jedes Handelshemmnis die Differenz zwischen heimischen Erzeugerpreisen und Importpreisen vergr?βert; diese Differenz—gemessen in vom Hundert des Importpreises—ist das Zoll?quivalent. Die Methode der Quantifizierung sollte je nach Art der statistischen Daten gew?hlt werden. Drei M?glichkeiten werden vorgeführt, und zwar für homogene Produkte ein direkter Preisvergleich am Beispiel des Steinkohlebergbaus, für heterogene Produkte ein Elastizit?tsansatz am Beispiel der feinkeramischen Industrie und ein Vergleich von Warenk?rben am Beispiel der Textilindustrie. Abschlieβend werden m?gliche Divergenzen zwischen Protektionswirkungen und Protektionsabsichten untersucht.

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Resumen Hacia un nuevo acuerdo sobre la liberalizatión del comercio international. —La diversidad de barreras no arancelarias existente se ha mostrado como obstáculo a una desarme general y lineal análogo a las reducciones arancelarias en la ronda Kennedy. En el presente trabajo los autores proponen el establecimiento, en cada pais, de un ?arancel aduanero de las trabas no arancelarias? que se obtiene mediante la calculación de equivalentes arancelarios de aquellas trabas. La premisa central es que cualquier barrera a la importatión aumenta la diferencia entre los precios industriales domésticos y los de importación; esta diferencia, expresada como porcentaje del precio de importación, corresponde al equivalente arancelario. El método de cuantificación a aplicar deberá regirse por los datos estadfsticos disponibles. Los autores presentan très posibilidades, a saber: para productos homogéneos una comparación de precios directa, tomándose como ejemplo la industria extractiva del carbón, para productos heterogéneos un concepto de elasticidad, sirviendo de ejemplo la industria de la cerámica, y una comparación de la cesta de productos, utilizándose como ejemplo la industria textil. Finalmente los autores analizan posibles divergencias entre los efectos y las intenciones de medidas proteccionistas.

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Résumé Vers de nouveaux accords sur la libéralisation du commerce international. —La diversité des barrières non-tarifaires au commerce a jusqu’ à présent empêché leur réduction universelle et linéaire—conformément aux réductions tarifaires du ?Kennedy Round?. Dans l’article que voici on propose donc de calculer pour chaque pays un tarif douanier des barrières non-tarifaires en quantifiant les mesures non-tarifaires sous forme d’équivalents de tarifs. L’hypothèse qui en sert de base soutient que chaque barrière au commerce international augmente la différence entre les prix du marché national et ceux du marché mondial; cette différence — exprimée en pourcentages des prix d’importation—représente l’équivalent du tarif douanier. La méthode de quantification doit être adaptée aux données statistiques qu’on possède. Trois possibilités sont discutées en détail: pour les produits homogènes, la comparaison directe démontrée à l’exemple de l’industrie minière du charbon; pour les produits hétérogènes, un calcul d’élasticité demontre à l’exemple de l’industrie de poterie, et la comparaison de paniers de marchandises démontrée à l’exemple de l’industrie textile. Finalement, sont examinées les divergences possibles entre les effets du protectiónnisme et l’intention protectionniste.

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Riassunto Di nuovi accordi sulla liberalizzazione del commercio internazionale. —La molteplicit à degli ostacoli commerciali non tariffari sta finora in opposizione —analogamente aile trattative doganali del Kennedy-Runde—alla sua generale e lineare demolizione. Nel presente studio viene perció proposto di calcolare per ogni Paese una ?tariffa doganale degli ostacoli commerciali non tariffari?, mentre provvedimenti extratariffari sono quantificati in forma di equivalenze doganali. Inoltre l’ipotesi centrale è che ogni ostacolo commerciale ingrandisce la differenza tra prezzi di prodotti nazionali e prezzi d’importazione; questa differenza—misurata in per cento del prezzo d’importazione—è l’equivalenza doganale. Il metodo delia quantificazione dovrebbe essere scelto a seconda del genère dei dati statistici. Tre possibilit à sono presentate, e cioè per prodotti omogenei un diretto confronto dei prezzi sull’esempio dell’industria mineraria del carbone, per prodotti eterogenei un’impiego di elasticit à sull’esempio dell’industria di cerámica fine e un confronto di canestri di merci sull’esempio dell’industria tessile. In ultimo sono analizzate possibili divergenze tra effetti di protezione e intenzioni di protezione.

     

Economic integration agreements,immigrants and trade costs

Review of World Economics - Using data on the levels of economic integration agreements (EIAs) among 172 countries (35 OECD members and 137 non-members) that span the years 1995–2009, we...     

Are all trade agreements equal? The role of distance in shaping the effect of economic integration agreements on trade flows

Review of World Economics - How does geographic distance affect the impact of trade agreements on bilateral exports, and through what channels? This paper examines these questions in a gravity...     

Measuring trade creation effects of free trade agreements: Evidence from wine trade in East Asia

East Asia has experienced an unprecedented expansion in its wine market over the past two decades. This paper examines the extent to which import tariff reductions through bilateral free trade agreements (FTAs) have contributed to an increase in wine imports to Japan, China, and South Korea. Our empirical method involves estimating an augmented version of the gravity equation by the Poisson pseudo-maximum likelihood (PPML) technique. Analyzing a panel dataset for 1990–2016 covering 27 exporters, we find that overall a 1 percentage point reduction in tariff among FTA member countries is associated with an increase in the wine import volumes by 0.042%, which is seven times higher than a similar reduction in tariff on an MFN basis. The strongest trade creation effects are founded for bottle wine. The results are robust to various specifications.     

Domestic product standards,harmonization, and free trade agreements

Review of World Economics - This study considers endogenous domestic standards on products to control negative consumption externalities using a three-country model of international oligopoly with...     

Understanding the role of trade agreements in Indonesia’s FDI

In this paper, we develop the hypothesis that trade agreements influence foreign direct investment (FDI). We extend the conventional model of FDI determinants to accommodate the role of trade agreements. Fitting Indonesian data to this model, we discover strong evidence that, while both bilateral and multilateral trade agreements positively influence Indonesia’s FDI, multilateral agreements have a larger effect. We further distinguish FDI by sector and find sector-specific trade agreements play an active role: these agreements positively influence FDI in the primary and service sectors, but not in the manufacturing sector. We also find that trade agreements positively influence FDI through the export and total factor productivity channels, and less so through the economic growth channel.     

The breadth of preferential trade agreements and the margins of exports

Review of World Economics - The paper uses recently available data on the core economic provisions of PTAs to identify which (types of) provisions seem to promote bilateral exports and the...     

The effects of regional trade agreements on FDI by its origin and type: Evidence from U.S. multinational enterprises activities

The effects of regional trade agreements (RTAs) on foreign direct investment (FDI) depend on both the origin and type of FDI. To estimate the various effects of RTAs, I differentiate between various types of FDI by using data on the sales destinations of foreign subsidiaries of U.S. multinational enterprises (MNEs), while also addressing the endogeneity of RTA formation. Consistent with the theory of MNEs, I find that RTAs reduce horizontal FDI from intra-RTA countries and increase export-platform and total FDI from extra-RTA countries. Moreover, the overall effects of RTAs are positive for extra-RTA FDI, but inconclusive for intra-RTA FDI. The results also support the effect of integrated markets’ economies of scale in inducing extra-RTA FDI.     

Strategic export subsidies and reciprocal trade agreements: The natural monopoly case

Why do governments seek restrictions on the use of export subsidies through reciprocal trade agreements such as GATT? In this paper, we emphasize that subsidy competition between governments can serve to coordinate the entry decisions of firms, finding that consumers in the importing countries may suffer if the coordination afforded exporters by government subsidy programs does more to prevent entry than to promote it. In such circumstances, we show that the existence of export subsidy programs can lead to inefficiencies, and importing countries and the world as a whole can be better off when such programs are banned.