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Impact of diagonal cumulation rule on FTA utilization : evidence from bilateral and multilateral FTAs between Japan and Thailand

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  • Hayakawa, Kazunobu

Abstract

In this paper, we empirically investigate the effect of diagonal cumulation on free trade agreement (FTA) utilization by exploring Thai exports to Japan under two kinds of FTA schemes. While the one scheme adopts bilateral cumulation, the other scheme does diagonal cumulation. Comparing trade under these two kinds of FTAs, we can examine the effect of diagonal cumulation without relying on not only the variation in cumulation rules across country pairs but also the variation across years. In short, our estimates do not suffer from biases from time-variant elements and country pair-specific elements. As a result, our estimates show around 4% trade creation effect of diagonal cumulation, which is much smaller than the estimates in the previous studies (around 15%).

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File URL: http://ir.ide.go.jp/dspace/bitstream/2344/1188/1/ARRIDE_Discussion_No.372_hayakawa.pdf
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Bibliographic Info

Paper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 372.

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Date of creation: Nov 2012
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Publication status: Published in IDE Discussion Paper. No. 372. 2012.11
Handle: RePEc:jet:dpaper:dpaper372

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Related research

Keywords: Thailand; Japan; Trade policy; International economic integration; International agreements; FTA; Tariff; Diagonal cumulation; Trade creation effect;

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  1. J. Francois & B. Hoekman & M. Manchin, 2005. "Preference Erosion and Multilateral Trade Liberalization," Tinbergen Institute Discussion Papers 05-073/2, Tinbergen Institute.
  2. Hayakawa, Kazunobu, 2011. "Measuring fixed costs for firms’ use of a free trade agreement: Threshold regression approach," Economics Letters, Elsevier, vol. 113(3), pages 301-303.
  3. Bureau, Jean-Christophe & Chakir, Raja & Gallezot, Jacques, 2006. "The Utilisation of EU and US Trade Preferences for Developing Countries in the Agri-Food Sector," Working Papers 18867, TRADEAG - Agricultural Trade Agreements.
  4. AUGIER Patricia & GAZIOREK Michael & LAITONG Charles, 2004. "The Impact of Rules of Origin On Trade Flows," International Trade 0404001, EconWPA.
  5. Bruce E. Hansen, 1996. "Sample Splitting and Threshold Estimation," Boston College Working Papers in Economics 319., Boston College Department of Economics, revised 12 May 1998.
  6. Miriam Manchin, 2006. "Preference Utilisation and Tariff Reduction in EU Imports from ACP Countries," The World Economy, Wiley Blackwell, vol. 29(9), pages 1243-1266, 09.
  7. Svetlana Demidova & Kala Krishna, 2007. "Firm Heterogeneity and Firm Behavior with Conditional Policies," NBER Working Papers 12950, National Bureau of Economic Research, Inc.
  8. Cadot, Olivier & Carrere, Celine & De Melo, Jaime & Tumurchudur, Bolormaa, 2006. "Product-specific rules of origin in EU and US preferential trading arrangements: an assessment," World Trade Review, Cambridge University Press, vol. 5(02), pages 199-224, July.
  9. Jean-Christophe Bureau & Raja Chakir & Jacques Gallezot, 2007. "The Utilisation of Trade Preferences for Developing Countries in the Agri-food Sector," Journal of Agricultural Economics, Wiley Blackwell, vol. 58(2), pages 175-198, 06.
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Cited by:
  1. Hayakawa, Kazunobu & Nuttawut, Laksanapanyakul & Shiino, Kohei, 2013. "Some practical guidance for the computation of free trade agreement utilization rates," IDE Discussion Papers 438, Institute of Developing Economies, Japan External Trade Organization(JETRO).

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