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

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  1. Francois, Joseph & Hoekman, Bernard & Manchin, Miriam, 2005. "Preference Erosion and Multilateral Trade Liberalization," CEPR Discussion Papers 5153, C.E.P.R. Discussion Papers.
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  3. Céline Carrere & Olivier Cadot & Jaime Melo De & Bolormaa Tumurchudur, 2011. "Product Specific Rules of Origin in EU and US Preferential Trading Arrangements: An Assessment," Working Papers halshs-00564704, HAL.
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  5. 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.
  6. Kati Suominen & Antoni Estevadeordal, 2004. "Rules of Origin in FTAs in Europe and in the Americas: Issues and Implications for the EU-Mercosur Inter-Regional Association Agreement," IDB Publications 9346, Inter-American Development Bank.
  7. 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.
  8. Svetlana Demidova & Kala Krishna, 2007. "Firm Heterogeneity and Firm Behavior with Conditional Policies," NBER Working Papers 12950, National Bureau of Economic Research, Inc.
  9. Olivier Cadot & Jaime de Melo, 2007. "Why OECD Countries Should Reform Rules of Origin," World Bank Research Observer, World Bank Group, vol. 23(1), pages 77-105, October.
  10. AUGIER Patricia & GAZIOREK Michael & LAITONG Charles, 2004. "The Impact of Rules of Origin On Trade Flows," International Trade 0404001, EconWPA.
  11. 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.
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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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