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Impact of diagonal cumulation rule on FTA utilization : evidence from bilateral and multilateral FTAs between Japan and Thailand

  • Hayakawa, Kazunobu

In this paper, we empirically investigate the effect of diagonal cumulation on free trade agreement (FTA) utilization by exploring Thai exports to Japan under two kinds of FTA schemes. While the one scheme adopts bilateral cumulation, the other scheme does diagonal cumulation. Comparing trade under these two kinds of FTAs, we can examine the effect of diagonal cumulation without relying on not only the variation in cumulation rules across country pairs but also the variation across years. In short, our estimates do not suffer from biases from time-variant elements and country pair-specific elements. As a result, our estimates show around 4% trade creation effect of diagonal cumulation, which is much smaller than the estimates in the previous studies (around 15%).

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Paper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 372.

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Date of creation: Nov 2012
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Publication status: Published in IDE Discussion Paper. No. 372. 2012.11
Handle: RePEc:jet:dpaper:dpaper372
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  1. Olivier CADOT & Jaime MELO DE & Céline CARRERE & Bolormaa TUMURCHUDUR, 2005. "Product Specific Rules of Origin in EU and US Preferential Trading Arrangements: An Assessment," Working Papers 200508, CERDI.
  2. Jean-Christophe Bureau & Raja Chakir & Jacques Gallezot, 2007. "The Utilisation of Trade Preferences for Developing Countries in the Agri-food Sector," Journal of Agricultural Economics, Wiley Blackwell, vol. 58(2), pages 175-198, 06.
  3. Joseph Francois & Bernard Hoekman & Miriam Manchin, 2006. "Preference Erosion and Multilateral Trade Liberalization," World Bank Economic Review, World Bank Group, vol. 20(2), pages 197-216.
  4. Bruce E. Hansen, 2000. "Sample Splitting and Threshold Estimation," Econometrica, Econometric Society, vol. 68(3), pages 575-604, May.
  5. Hayakawa, Kazunobu, 2011. "Measuring fixed costs for firms’ use of a free trade agreement: Threshold regression approach," Economics Letters, Elsevier, vol. 113(3), pages 301-303.
  6. Bureau, Jean-Christophe & Chakir, Raja & Gallezot, Jacques, 2006. "The Utilisation of EU and US Trade Preferences for Developing Countries in the Agri-Food Sector," Working Papers 18867, TRADEAG - Agricultural Trade Agreements.
  7. Svetlana Demidova & Kala Krishna, 2007. "Firm Heterogeneity and Firm Behavior with Conditional Policies," NBER Working Papers 12950, National Bureau of Economic Research, Inc.
  8. AUGIER Patricia & GAZIOREK Michael & LAITONG Charles, 2004. "The Impact of Rules of Origin On Trade Flows," International Trade 0404001, EconWPA.
  9. Olivier Cadot & Jaime de Melo, 2007. "Why OECD Countries Should Reform Rules of Origin," World Bank Research Observer, World Bank Group, vol. 23(1), pages 77-105, October.
  10. Miriam Manchin, 2006. "Preference Utilisation and Tariff Reduction in EU Imports from ACP Countries," The World Economy, Wiley Blackwell, vol. 29(9), pages 1243-1266, 09.
  11. Kati Suominen & Antoni Estevadeordal, 2004. "Rules of Origin in FTAs in Europe and in the Americas: Issues and Implications for the EU-Mercosur Inter-Regional Association Agreement," IDB Publications (Working Papers) 9346, Inter-American Development Bank.
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