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Trade Performance of Free Trade Zones

Listed author(s):
  • Jean-Marc Siroën


    (PSL, Université Paris-Dauphine,LEDa, IRD UMR DIAL, 75016 Paris, France)

  • Ayçil Yücer


    (University of Dokuz Eylül,Department of Economics, Izmir 35160 Turkey, PSL, Université Paris-Dauphine, LEDa, IRD UMR DIAL, 75016 Paris, France)

Free trade zones (FTZ) have become widespread with the liberalisation of international trade and investment. They are a key player in the deepening of the global value chain (GVC). However, little is known about their contribution to world trade due to a lack of information on their location and status. This paper sets out to improve knowledge in this area by analysing the trade performance of FTZ countries at macro-level with a focus on FTZ externalities and distortive costs. We have built an original database of FTZs where we define them as processing zones benefiting from import tariff incentives. We show that FTZs raise trade only by easing the negative impact of protection. As importers of components and raw materials, they raise the rest of the world’s exports. This confirms the contribution of FTZs to the GVC. This result is robust to a change in the model specification, errors and bias due to data collection issues and sample composition. _________________________________ Les zones de libre-échange (ZFE) ont proliféré avec la libéralisation du commerce et de l’investissement. Elles jouent un rôle clé dans l’approfondissement de la chaîne mondiale de valeur. Toutefois, leur contribution au commerce international est peu connue, du fait du manque d’informations sur leur localisation et leur statut. Cet article tente d’améliorer leur connaissance en analysant les performances commerciales des pays abritant des ZFE avec un focus sur les externalités et les coûts dus aux distorsions. Nous avons ainsi construit une base de données originale sur les ZFE définies comme des zones de transformation industrielle bénéficiant d’incitations sur les droits de douane. Nous montrons que les ZFE ne contribuent à augmenter le commerce du pays qu’en réduisant l’impact négatif du protectionnisme. En tant qu’importateurs de composants et de matières premières, elles augmentent les exportations des autres pays, ce qui confirme la contribution des ZFE à la chaîne globale de valeur. Ce résultat est robuste avec d’autres spécifications du modèle, les erreurs et les biais dus aux problèmes de collecte des données et de composition de l’échantillon.

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Paper provided by DIAL (Développement, Institutions et Mondialisation) in its series Working Papers with number DT/2014/09.

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Length: 28 pages
Date of creation: Sep 2014
Handle: RePEc:dia:wpaper:dt201409
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  1. Michael Engman & Osamu Onodera & Enrico Pinali, 2007. "Export Processing Zones: Past and Future Role in Trade and Development," OECD Trade Policy Papers 53, OECD Publishing.
  2. Santos Silva, J.M.C. & Tenreyro, Silvana, 2011. "Further simulation evidence on the performance of the Poisson pseudo-maximum likelihood estimator," Economics Letters, Elsevier, vol. 112(2), pages 220-222, August.
  3. Johansson, Helena & Nilsson, Lars, 1997. "Export processing zones as catalysts," World Development, Elsevier, vol. 25(12), pages 2115-2128, December.
  4. Creskoff, Stephen & Walkenhorst, Peter, 2009. "Implications of WTO disciplines for special economic zones in developing countries," Policy Research Working Paper Series 4892, The World Bank.
  5. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  6. Cindy Duc & Emmanuelle Lavallee & Jean-Marc Siroen, 2008. "The Gravity of Institutions," Economie Internationale, CEPII research center, issue 113, pages 95-113.
  7. repec:dau:papers:123456789/214 is not listed on IDEAS
  8. Thomas Farole & Gokhan Akinci, 2011. "Special Economic Zones : Progress, Emerging Challenges, and Future Directions," World Bank Publications, The World Bank, number 2341, April.
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