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Not all PTAs are Equal: Credible Commitment through PTAs and their Effects on Trade. Raymond Hicks Soo Yeon Kim Princeton University University of Maryland. Question: How do PTAs affect trade among participants?. Focus: Are the effects of PTAs homogeneous?.

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not all ptas are equal credible commitment through ptas and their effects on trade

Not all PTAs are Equal:Credible Commitment through PTAs and their Effects on Trade

Raymond Hicks Soo Yeon Kim

Princeton University University of Maryland

question how do ptas affect trade among participants

Question: How do PTAs affect trade among participants?

Focus:

Are the effects of PTAs homogeneous?

argument ptas signal credible commitment to trade liberalization

Argument: PTAs signal credible commitment to trade liberalization

PTAs differ in the level of credibility embedded in their provisions

PTAs therefore differ in their effect on trade as a function of these provisions

coding rtas and levels of credibility weighted index 5 categories 19 components
Coding RTAs and Levels of Credibility:Weighted index 5 categories, 19 components
  • Type of RTA
  • Breadth of Coverage
  • Depth of Coverage
  • Pace of Change
  • Ratification and Withdrawal
overview 57 rtas in asia 1970 2006
Overview:57 RTAs in Asia, 1970-2006
  • Timing: higher scores for post-1995 RTAs
  • Higher scores for FTAs vs. PTAs
  • Higher scores for bilateral vs. multilateral agreements
  • Country differences: more developed countries (Japan, Singapore, Korea) have higher credibility scores
quantitative analysis
Quantitative Analysis:
  • Unit of analysis: directed-dyad year
  • Sample: dyads with at least one Asian country
  • Dependent variable: imports (in constant US dollars, 2000) of country i from country j in a given year
  • Independent variable of interest: dummy and continuous measures for RTA
  • Control variables: GDP, GDP per capita, land size, border, distance, language, colonial ties
conclusions
Conclusions:
  • RTAs differ in the levels of credibility embodied in their provisions
  • Analysis of RTAs in Asia shows that RTA signing and RTA credibility differ in their effect on trade for participants.
  • Surge in RTAs in recent years may lead to “crowding” in the Asian region, which may dilute their trade-creation effects.
future modifications for rta data
Future Modifications for RTA Data
  • Rules of origin requirements
    • Percentage of value content?
    • Tariff classification change?
  • Withdrawal
    • Longer time until withdraw takes effect = more credibility?
rta credibility index part 1
RTA credibility index, part 1
  • Type of RTA proposed – level of integration in the agreement (weight = 0.20)
  • Breadth of coverage – restrictions on actions of government (weight = 0.175)
      • Tariff reductions reciprocal (0.025)
      • Agriculture products covered (0.025)
      • Industrial products covered (0.025)
      • NTBs covered (0.05)
      • Technical barriers to trade (0.05)
rta credibility index part 2
RTA credibility index, part 2
  • Depth of coverage – stringency of enforcement mechanisms (weight = 0.45)
      • Dispute settlement (0.075)
      • Dispute settlement resolution (0.025)
      • Dispute settlement compensation (0.05)
      • Escape clause identification (0.075)
      • Escape clause action (0.05)
      • Dumping clauses (0.075)
      • Formal institutions (0.05)
      • Timing of meetings (0.05)
rta credibility index part 3
RTA credibility index, part 3
  • Pace of change – speed of movement to final objective (weight = 0.10)
      • Timetable (weight = 0.025)
      • Extent of initial tariff cuts (weight = 0.075)
  • Administration – operation of the agreement (weight = 0.075)
      • Ratification (weight =0.025)
      • Renewal (weight =0.025)
      • Amendment (weight =0.025)