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Impact of Free Trade Agreement Utilisation on Import Prices

Listed author(s):
  • Kazunobu Hayakawa

    (Inter-disciplinary Studies Center, Institute of Developing Economies, Japan)

  • Nuttawut Laksanapanyakul

    (Science and Technology Development Program, Thailand Development Research Institute, Thailand)

  • Hiroshi Mukunoki

    (Faculty of Economics, Gakushuin University, Japan)

  • Shujiro Urata

    (Economic Research Institute for ASEAN and East Asia, Graduate School of Asia-Pacific Studies, Waseda University, Japan)

We examine the impact of free trade agreement (FTA) utilisation on import prices. For this analysis, we employ establishment-level import data with information on tariff schemes, that is, the FTA and most-favoured-nation schemes used for importing. Unlike previous studies in this literature, we estimate the effects of FTA utilisation on prices by controlling for the differences in importing firms' characteristics. Our main findings are as follows. First, the effect of FTA use is overestimated when not controlling for the importing firm-related fixed effects. Second, the average effect of the tariff reduction induced by FTA utilisation is a 3.6-6.7 percent rise in import prices. Third, in general, we do not find a price rise resulting from the costs of compliance with the rules of origin. Fourth, we also find several other factors that affect import prices in the case of FTA utilisation.

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File URL: http://www.eria.org/ERIA-DP-2016-24.pdf
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Paper provided by Economic Research Institute for ASEAN and East Asia (ERIA) in its series Working Papers with number DP-2016-24.

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Length: 48 pages.
Date of creation: Aug 2016
Handle: RePEc:era:wpaper:dp-2016-24
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