IDEAS home Printed from https://ideas.repec.org/p/eti/dpaper/17091.html
   My bibliography  Save this paper

FTAs and the Pattern of Trade: The case of the Japan-Chile FTA

Author

Listed:
  • KUNO Arata
  • URATA Shujiro
  • YOKOTA Kazuhiko

Abstract

Economists have long sought to explain the pattern of trade by developing international trade theories since the theory of comparative cost/advantage was developed by David Ricardo in the 19th century. Applying the Ricardian continuum goods model developed by Dornbusch, Fischer and Samuelson (1977) and by incorporating contributions from a new new trade theory (heterogeneous firm trade theory), we estimate the impacts of the Japan-Chile free trade agreement (FTA) (JCEPA) on extensive and intensive margins of Japan's exports to Chile. Our results show that the tariff liberalization under the JCEPA increases both extensive and intensive margins of Japan's exports to Chile. We also find that a rise in the ranking of comparative advantage caused by the JCEPA increased extensive margins. These findings indicate the importance of expanding FTA networks and promoting the use of FTAs, in order to increase trade. Governments can contribute to an increase in the use of FTAs by implementing the measures such as disseminating information about the benefits of using FTAs and simplifying the procedure for obtaining the certificate of origin, which is required for using FTAs.

Suggested Citation

  • KUNO Arata & URATA Shujiro & YOKOTA Kazuhiko, 2017. "FTAs and the Pattern of Trade: The case of the Japan-Chile FTA," Discussion papers 17091, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:17091
    as

    Download full text from publisher

    File URL: https://www.rieti.go.jp/jp/publications/dp/17e091.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gabriel J Felbermayr & Wilhelm Kohler, 2014. "Exploring the Intensive and Extensive Margins of World Trade," World Scientific Book Chapters, in: European Economic Integration, WTO Membership, Immigration and Offshoring, chapter 4, pages 115-148, World Scientific Publishing Co. Pte. Ltd..
    2. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-1721, September.
    3. Christian Broda & David E. Weinstein, 2006. "Globalization and the Gains From Variety," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(2), pages 541-585.
    4. Shujiro Urata & Misa Okabe, 2014. "Trade Creation and Diversion Effects of Regional Trade Agreements: A Product-level Analysis," The World Economy, Wiley Blackwell, vol. 37(2), pages 267-289, February.
    5. Pinelopi K. Goldberg & Nina Pavcnik, 2016. "The Effects of Trade Policy," NBER Working Papers 21957, National Bureau of Economic Research, Inc.
    6. Costas Arkolakis & Sharat Ganapati & Marc-Andreas Muendler, 2021. "The Extensive Margin of Exporting Products: A Firm-Level Analysis," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(4), pages 182-245, October.
    7. Timothy J. Kehoe & Kim J. Ruhl, 2013. "How Important Is the New Goods Margin in International Trade?," Journal of Political Economy, University of Chicago Press, vol. 121(2), pages 358-392.
    8. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    9. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-177, March.
    10. Buono, Ines & Lalanne, Guy, 2012. "The effect of the Uruguay round on the intensive and extensive margins of trade," Journal of International Economics, Elsevier, vol. 86(2), pages 269-283.
    11. Matthieu Crozet & Pamina Koenig, 2010. "Structural gravity equations with intensive and extensive margins," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 43(1), pages 41-62, February.
    12. Dutt, Pushan & Mihov, Ilian & Van Zandt, Timothy, 2013. "The effect of WTO on the extensive and the intensive margins of trade," Journal of International Economics, Elsevier, vol. 91(2), pages 204-219.
    13. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-839, December.
    14. repec:hal:spmain:info:hdl:2441/6apm7lruv088iagm4rv2c33jtg is not listed on IDEAS
    15. Neil Foster, 2012. "Preferential Trade Agreements and the Margins of Imports," Open Economies Review, Springer, vol. 23(5), pages 869-889, November.
    16. Robert C. Feenstra & Hiau Looi Kee, 2007. "Trade Liberalisation and Export Variety: A Comparison of Mexico and China," The World Economy, Wiley Blackwell, vol. 30(1), pages 5-21, January.
    17. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, vol. 102(1), pages 94-130, February.
    18. David Hummels & Peter J. Klenow, 2005. "The Variety and Quality of a Nation's Exports," American Economic Review, American Economic Association, vol. 95(3), pages 704-723, June.
    19. Debaere, Peter & Mostashari, Shalah, 2010. "Do tariffs matter for the extensive margin of international trade? An empirical analysis," Journal of International Economics, Elsevier, vol. 81(2), pages 163-169, July.
    20. Jeroen Hinloopen & Charles Marrewijk, 2001. "On the empirical distribution of the Balassa index," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 137(1), pages 1-35, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. KUNO Arata & URATA Shujiro & YOKOTA Kazuhiko, 2016. "Estimating the Impacts of FTA on Foreign Trade: An analysis of extensive and intensive trade margins for the Japan-Mexico FTA," Discussion papers 16003, Research Institute of Economy, Trade and Industry (RIETI).
    2. Bergstrand, Jeffrey H. & Cray, Stephen R. & Gervais, Antoine, 2023. "Increasing marginal costs, firm heterogeneity, and the gains from “deep” international trade agreements," Journal of International Economics, Elsevier, vol. 144(C).
    3. D’Artis Kancs, 2010. "Structural Estimation of Variety Gains from Trade Integration in Asia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 43(3), pages 270-288, September.
    4. Türkcan, Kemal & Pişkin, Erhan, 2014. "Ticaret Anlaşmalarının Türkiye’nin İhracat Dinamiğine Etkisi: Yaygın ve Yoğun Ticaret [The Effects of the Trade Agreements on the Dynamics of Turkey’s Export: Extensive and Intensive Margins]," MPRA Paper 59841, University Library of Munich, Germany.
    5. Jonathan Eaton & Ana Cecília Fieler, 2019. "The Margins of Trade," NBER Working Papers 26124, National Bureau of Economic Research, Inc.
    6. Mitik, Lulit & Decaluwé, Bernard, 2008. "The impact of trade on female labor and girls’ education in South Africa: a CGE analysis," Conference papers 331785, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    7. Jeffrey H. Bergstrand & Stephen R. Cray & Antoine Gervais, 2023. "Increasing Marginal Costs, Firm Heterogeneity,and the Gains from "Deep" International Trade Agreements," Cahiers de recherche 23-01, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    8. Hillberry, Russell & Hummels, David, 2013. "Trade Elasticity Parameters for a Computable General Equilibrium Model," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 1213-1269, Elsevier.
    9. Ardelean, Adina & Lugovskyy, Volodymyr, 2010. "Domestic productivity and variety gains from trade," Journal of International Economics, Elsevier, vol. 80(2), pages 280-291, March.
    10. Benkovskis, Konstantins & Wörz, Julia, 2018. "What drives the market share changes? Price versus non-price factors," Structural Change and Economic Dynamics, Elsevier, vol. 45(C), pages 9-29.
    11. Olivier Cadot & Céline Carrère & Vanessa Strauss-Kahn, 2013. "Trade Diversification, Income, And Growth: What Do We Know?," Journal of Economic Surveys, Wiley Blackwell, vol. 27(4), pages 790-812, September.
    12. Gao, Yue & Whalley, John & Ren, Yonglei, 2014. "Decomposing China's export growth into extensive margin, export quality and quantity effects," China Economic Review, Elsevier, vol. 29(C), pages 19-26.
    13. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    14. Baier, Scott L. & Bergstrand, Jeffrey H. & Feng, Michael, 2014. "Economic integration agreements and the margins of international trade," Journal of International Economics, Elsevier, vol. 93(2), pages 339-350.
    15. Margherita Scoppola & Valentina Raimondi & Alessandro Olper, 2018. "The impact of EU trade preferences on the extensive and intensive margins of agricultural and food products," Agricultural Economics, International Association of Agricultural Economists, vol. 49(2), pages 251-263, March.
    16. Persson, Maria, 2008. "Trade Facilitation and the Extensive and Intensive Margins of Trade," Working Papers 2008:13, Lund University, Department of Economics.
    17. Türkcan, Kemal, 2014. "Exports Margins in Austria’s Export Growth," MPRA Paper 53085, University Library of Munich, Germany.
    18. Daniel M. Bernhofen & Zouheir El‐Sahli & Richard Kneller, 2021. "The impact of technological change on new trade: Evidence from the container revolution," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(2), pages 923-943, May.
    19. Anne-Célia Disdier & Lionel Fontagné & Mondher Mimouni, 2015. "Tariff Liberalization and Trade Integration of Emerging Countries," Review of International Economics, Wiley Blackwell, vol. 23(5), pages 946-971, November.
    20. Balistreri, Edward J. & Hillberry, Russell H. & Rutherford, Thomas F., 2011. "Structural estimation and solution of international trade models with heterogeneous firms," Journal of International Economics, Elsevier, vol. 83(2), pages 95-108, March.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eti:dpaper:17091. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: TANIMOTO, Toko (email available below). General contact details of provider: https://edirc.repec.org/data/rietijp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.