Deep Integration: Considering the Heterogeneity of Free Trade Agreements

Regional Trade Agreements have emerged in an environment of stalled multilateral tradenegotiations. Although the impact of Regional Trade Agreements on international tradehas been well documented, scant attention has been paid to empirical studies exploringtheir heterogeneity from the point of view of deep integration. We set out to determinewhether deeper Regional Trade Agreements promote trade more effectively than lessambitious ones. We generate credible deep integration indicators using two recentlyavailable datasets from the World Trade Organization and the World Trade Institute. Wethen test the effect of depth on trade using a gravity model. We treat additive indicatorsas factor variables and use multiple correspondence analysis to obtain distilled indicatorsof deep integration to offer new insights and confirm recent deep integration findings.We find that deeper Regional Trade Agreements increase trade more than shallowagreements do, irrespective of whether the provisions they contain are within or beyondthe competence of the World Trade Organization.