Free Trade Agreements, Exports, and Structural Transformation

This paper examines the effects of free trade agreements (FTAs) with the United States on the sectoral composition of exports in partner countries. Using a staggered difference-in-differences design that accounts for heterogeneous treatment effects, we document that FTAs induce a systematic shift in export composition away from primary commodities and toward manufacturing. This expansion is concentrated in low-technology, labor-intensive sectors, with no significant effects on high-technology industries, consistent with specialization along existing comparative advantage. Dynamic treatment effects indicate that these structural changes are persistent and continue to evolve over time. We further show that these effects are heterogeneous across countries, with stronger responses in smaller, trade-dependent economies and more limited or mixed effects in larger or resource-based economies. These findings contribute to the trade and development literature by providing causal evidence that deeply negotiated bilateral FTAs can reshape export structure in developing economies.