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Trade creation effect of regional trade agreements in the presence of duty drawbacks

Author

Listed:
  • Hayakawa, Kazunobu Laksanapanyakul Nuttawut
  • Mukunoki, Hiroshi

Abstract

This study re-examines the trade creation effect of regional trade agreements (RTAs) under the duty drawback (DD) regime. We theoretically demonstrate that firms’ switch from the DD to RTA regime increases or decreases their imports and empirically analyze the regime-switching effect on imports using firm-level trade data in Thailand, for 2011–2017. We find that firms’ switch to the RTA regime increases their imported inputs for domestic production rather than for expanding exports. In terms of total exports, medium-sized firms switch to the RTA regime. The large-sized firms continue importing under the DD regime even after RTAs’ entry.

Suggested Citation

  • Hayakawa, Kazunobu Laksanapanyakul Nuttawut & Mukunoki, Hiroshi, 2020. "Trade creation effect of regional trade agreements in the presence of duty drawbacks," IDE Discussion Papers 804, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper804
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    More about this item

    Keywords

    Duty drawbacks; Trade creation effect; Regional trade agreement; International trade;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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