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Sensitive Sectors in Free Trade Agreements

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  • Alan V. Deardorff

    (University of Michigan)

Abstract

This paper documents the presence of Òsensitive sectorsÓ in Free Trade Agreements, defined as sectors for which the within-FTA tariffs remain positive. The paper includes some brief theoretical discussion of the welfare implications of these, but the main emphasis is on reporting two measures of this phenomenon for countries in FTAs that entered into force between 1994 and 2003. One measure is the percentage of tariff lines that remain dutiable, and the second is the change, from before the FTA to after, in the average maximum (across 6-digit products) positive tariffs. Both measures are derived from data in the UNCTAD TRAINS database, and are then related to measures of country characteristics that might explain them. Low per capita GDP countries tend to have larger fractions of dutiable tariff lines, while higher income countries tend to post larger increases in average maximum positive tariffs. Both suggest that the favored treatment of sensitive sectors is undermining the potential gains from trade that FTAs provide.

Suggested Citation

  • Alan V. Deardorff, 2017. "Sensitive Sectors in Free Trade Agreements," Working Papers 663, Research Seminar in International Economics, University of Michigan.
  • Handle: RePEc:mie:wpaper:663
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    File URL: http://www.fordschool.umich.edu/rsie/workingpapers/Papers651-675/r663.pdf
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    References listed on IDEAS

    as
    1. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-973, October.
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    Cited by:

    1. Alan V. Deardorff & Rishi R. Sharma, 2021. "Exempted sectors in free trade agreements," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(1), pages 284-310, February.

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    More about this item

    Keywords

    Free trade agreement; sensitive sectors;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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