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Exporters' Response to FTA Tariff Preferences: Evidence from Thailand

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  • Archanun KOHPAIBOON

Abstract

This paper examines how the private sector responds to export opportunities induced by FTAs, using evidence from the Thai manufacturing sector during the period 2003-08. The core methodology is to undertake an inter-product panel-data econometric analysis to gain a better understanding of FTA utilization across products. Different from previous studies, it makes an explicit distinction between actual and preferential trade in which the latter is measured by the administrative records of FTA implementation. Our findings suggest that the product coverage is limited. Products that have benefited from FTA tariff preferences so far are highly concentrated. Our key finding from the econometric analysis is that as rules of origin (ROO) constraints are binding empirically, the ability to comply with ROO as well as tariff margin does matter in firms' decisions to use FTAs. The estimated cost in compiling ROO is equivalent to a tariff in the range of 2% to 10%. Besides, the FTA impact on exports is conditioned by trade volume during the pre-signing FTA period. The key policy inference is that it is unlikely to be able to promote exports by maximizing the number of FTAs, while ignoring the nature of FTA partners. The nature of the FTA partner does matter in establishing whether the signed FTA would be useful. In addition, for Japan and countries which are enthusiastic about FTAs as a mode for further liberalization, FTA negotiation on tariff cuts schedules must be undertaken in a more comprehensive way in which ROO and trade facilitation issues must be incorporated in the negotiation.

Suggested Citation

  • Archanun KOHPAIBOON, 2010. "Exporters' Response to FTA Tariff Preferences: Evidence from Thailand," Discussion papers 10039, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:10039
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    References listed on IDEAS

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    1. Archanun KOHPAIBOON & Juthathip JONGWANICH, 2015. "Use of FTAs from Thai Experience," Working Papers DP-2015-02, Economic Research Institute for ASEAN and East Asia (ERIA).
    2. Baldwin, Richard & Jaimovich, Dany, 2012. "Are Free Trade Agreements contagious?," Journal of International Economics, Elsevier, vol. 88(1), pages 1-16.
    3. Takahashi, Katsuhide & Urata, Shujiro, 2010. "On the Use of FTAs by Japanese Firms: Further Evidence," Business and Politics, Cambridge University Press, vol. 12(1), pages 1-15, April.
    4. Kala Krishna, 2005. "Understanding Rules of Origin," NBER Working Papers 11150, National Bureau of Economic Research, Inc.
    5. Ronald W. Jones, 2000. "Globalization and the Theory of Input Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 026210086x, December.
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    Cited by:

    1. Archanun Kohpaiboon & Juthathip Jongwanich, 2022. "Restrictiveness of RCEP Rules of Origin: Implications for Global Value Chains in East Asia," Chapters, in: Fukunari Kimura & Shujiro Urata & Shandre Mugan Thangavelu & Dionisius Narjoko (ed.), Dynamism of East Asia and RCEP: The Framework for Regional Integration, chapter 3, pages 39-69, Economic Research Institute for ASEAN and East Asia (ERIA).
    2. repec:era:eriabk:2021-impact-of-the-atiga-on-intra-asean-trade is not listed on IDEAS
    3. Archanun KOHPAIBOON & Juthathip JONGWANICH, 2015. "Use of FTAs from Thai Experience," Working Papers DP-2015-02, Economic Research Institute for ASEAN and East Asia (ERIA).
    4. Prema-chandra Athukorala & Dayaratna Silva, 2019. "The FTA debate in Sri Lanka: Rhetoric and Reality," ASARC Working Papers 2019-03, The Australian National University, Australia South Asia Research Centre.
    5. Okabe, Misa & Urata, Shujiro, 2014. "The impact of AFTA on intra-AFTA trade," Journal of Asian Economics, Elsevier, vol. 35(C), pages 12-31.
    6. Zadia M. Feliciano & Nadia Doytch, 2020. "Trade Liberalization And Firm Performance: The Case Of Thailand," Contemporary Economic Policy, Western Economic Association International, vol. 38(4), pages 607-621, October.
    7. Prema-chandra Athukorala, 2020. "Free Trade Agreements in the World Trade System: Substance and Semantics," Foreign Trade Review, , vol. 55(1), pages 13-20, February.
    8. Margalida Murillo & Cindy Paola Leal, 2021. "Tratados de Libre Comercio y duración de las exportaciones: Evidencia a nivel de firma para Colombia," Revista Desarrollo y Sociedad, Universidad de los Andes,Facultad de Economía, CEDE, vol. 88(6), pages 201-238, July.

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