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Unlocking the impact of US free trade agreements on industries with a synthetic control approach

Author

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  • Sang‐Wook (Stanley) Cho
  • Hansoo Choi

Abstract

This study explores the industry‐level effects of the FTAs that the United States signed with Chile, Australia and the Dominican Republic between 2004 and 2007. Employing a synthetic control approach, we uncover heterogeneity in post‐FTA export growth across countries and industries. The study reveals that only a limited subset of industries in the US, which contributed to roughly one seventh of pre‐FTA exports, experienced post‐FTA export gains. No single industry consistently benefited from the FTAs with all three partners. This heterogeneity is present in countries where FTA‐induced aggregate export growth is absent, as well as in those where only a few industries drive the aggregate export growth. Export increases were also concentrated in a limited range of products. Notably, only exports to Chile led to increased export intensity and diversification at both the aggregate and industry levels. These findings, robust to various specifications and estimation methods, highlight the substantial variation in FTA effects across industries and partner countries. Décrypter l'incidence des accords de libre‐échange des États‐Unis sur les industries à l'aide d'une méthode de contrôle synthétique. Cette étude explore les effets sectoriels des accords de libre‐échange (ALE) que les États‐Unis ont signé avec le Chili, l'Australie et la République dominicaine entre 2004 et 2007. À l'aide d'une méthode de contrôle synthétique, nous découvrons l'hétérogénéité de la croissance des exportations après la signature des ALE entre les pays et les industries. L'étude révèle que seul un sous‐ensemble limité d'industries aux États‐Unis, qui ont contribué à environ un septième des exportations avant les ALE, a connu des gains d'exportation après leur signature. Aucune industrie n'a bénéficié de manière constante des ALE conclus avec les trois partenaires. Cette hétérogénéité est présente dans les pays où il n'y a pas de croissance globale des exportations induite par l'ALE, ainsi que dans ceux où seules quelques industries sont à l'origine de la croissance globale des exportations. L'augmentation des exportations est également concentrée sur une gamme limitée de produits. Notamment, seules les exportations vers le Chili ont entraîné une augmentation de l'intensité et de la diversification des exportations, tant globales que sectorielles. Ces résultats, fiables en fonction des différentes spécifications et méthodes d'estimation, mettent en évidence la variation substantielle des effets des ALE entre les industries et les pays partenaires.

Suggested Citation

  • Sang‐Wook (Stanley) Cho & Hansoo Choi, 2025. "Unlocking the impact of US free trade agreements on industries with a synthetic control approach," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 58(2), pages 716-746, May.
    • Handle: RePEc:wly:canjec:v:58:y:2025:i:2:p:716-746
    DOI: 10.1111/caje.70002
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    References listed on IDEAS

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    1. Hyeongwoo Kim & Madeline H. Kim & Divya Sadana & Jie Zhang, 2022. "Was the KORUS FTA a Horrible Deal?," Auburn Economics Working Paper Series auwp2022-02, Department of Economics, Auburn University.

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