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How do free trade agreements reduce tariff rates and non-tariff barriers?

  • Hayakawa, Kazunobu
  • Kimura, Fukunari

This paper empirically investigates how far free trade agreements (FTAs) successfully lower tariff rates and non-tariff barriers (NTBs) for manufacturing industries by employing the bilateral tariff and NTB data in a time series for countries around the world. We find that FTAs under GATT Article XXIV and the Enabling Clause contribute to reducing tariff rates by 2.1% points and 1.5% points, respectively. In the case of NTBs, their respective impacts are 6.6% points and 5.7% points. Membership in the World Trade Organization (WTO) does not contribute greatly to reducing tariff rates but does play a significant role in reducing NTBs. These results provide important implications for the literature on numerical assessments of FTAs.

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File URL: http://ir.ide.go.jp/dspace/bitstream/2344/1300/1/ARRIDE_Discussion_No.446_hayakawa.pdf
File Function: First version, 2014
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Paper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 446.

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Date of creation: Feb 2014
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Publication status: Published in IDE Discussion Paper. No. 446. 2014.2
Handle: RePEc:jet:dpaper:dpaper446
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  1. Jayjit Roy, 2008. "Do Customs Union Members Engage In More Bilateral Trade Than Free Trade Agreement Members?," Departmental Working Papers 0803, Southern Methodist University, Department of Economics.
  2. Pao-li Chang & Myoung-jae Lee, 2007. "The WTO Trade Effect," Trade Working Papers 22063, East Asian Bureau of Economic Research.
  3. Guglielmo Caporale & Christophe Rault & Robert Sova & Anamaria Sova, 2009. "On the bilateral trade effects of free trade agreements between the EU-15 and the CEEC-4 countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 145(2), pages 189-206, July.
  4. Medvedev, Denis, 2006. "Preferential trade agreements and their role in world trade," Policy Research Working Paper Series 4038, The World Bank.
  5. Dennis Novy, 2012. "Gravity Redux: Measuring International Trade Costs with Panel Data," CEP Discussion Papers dp1114, Centre for Economic Performance, LSE.
  6. Vincent Vicard, 2009. "On Trade Creation and Regional Trade Agreements: Does Depth Matter?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00395100, HAL.
  7. Michael G. Plummer & Ganeshan Wignaraja, 2006. "The Post-Crisis Sequencing of Economic Integration in Asia: Trade as a Complement to a Monetary Future," Economie Internationale, CEPII research center, issue 107, pages 59-85.
  8. Winchester, Niven, 2009. "Is there a dirty little secret? Non-tariff barriers and the gains from trade," Journal of Policy Modeling, Elsevier, vol. 31(6), pages 819-834, November.
  9. Subramanian, Arvind & Wei, Shang-Jin, 2007. "The WTO promotes trade, strongly but unevenly," Journal of International Economics, Elsevier, vol. 72(1), pages 151-175, May.
  10. Demidova, Svetlana & Krishna, Kala, 2008. "Firm heterogeneity and firm behavior with conditional policies," Economics Letters, Elsevier, vol. 98(2), pages 122-128, February.
  11. Alexander Vogel & Joachim Wagner, 2010. "Higher productivity in importing German manufacturing firms: self-selection, learning from importing, or both?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 145(4), pages 641-665, January.
  12. Park, Innwon & Park, Soonchan, 2009. "Consolidation and Harmonization of Regional Trade Agreements (RTAs): A Path Toward Global Free Trade," MPRA Paper 14217, University Library of Munich, Germany, revised 23 Mar 2009.
  13. Hayakawa, Kazunobu, 2013. "How serious is the omission of bilateral tariff rates in gravity?," Journal of the Japanese and International Economies, Elsevier, vol. 27(C), pages 81-94.
  14. Scott L. Baier & Jeffrey H. Bergstrand, 2005. "Do free trade agreements actually increase members’ international trade?," Working Paper 2005-03, Federal Reserve Bank of Atlanta.
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