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Third-Country Effects of Regional Trade Agreements : A Firm-Level Analysis

Author

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  • Lee,Woori
  • Mulabdic,Alen
  • Ruta,Michele

Abstract

Do regional trade agreements negatively impact non-members? This paper revisits this long-standing trade policy question using firm-level data and detailed information on the content of trade agreements. Differently from the conventional view on trade diversion, the analysis identifies a positive spillover effect of regional trade agreements: they increase the probability of export and entry of third-country firms that previously exported to one of the member countries. This spillover effect is driven by deeper trade agreements, as they make member countries more"similar"in terms of the regulatory environment. Indeed, firms exporting regulation-intensive products benefit disproportionately more from deep trade agreements in destination markets, especially if the agreement includes nondiscriminatory provisions and addresses regulatory issues.

Suggested Citation

  • Lee,Woori & Mulabdic,Alen & Ruta,Michele, 2019. "Third-Country Effects of Regional Trade Agreements : A Firm-Level Analysis," Policy Research Working Paper Series 9064, The World Bank.
    • Handle: RePEc:wbk:wbrwps:9064
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    Cited by:

    1. Kim, Dongin & Steinbach, Sandro & Zurita, Carlos, 2024. "Deep trade agreements and agri-food global value chain integration," Food Policy, Elsevier, vol. 127(C).
    2. Essotanam Mamba & Afi Balaki, 2023. "Deep regional trade agreement as a driver for global value chains in Africa: the case of ECOWAS region," Economic Change and Restructuring, Springer, vol. 56(3), pages 2037-2068, June.
    3. Hyeongwoo Kim & Madeline H. Kim & Divya Sadana & Jie Zhang, 2022. "Was the KORUS FTA a Horrible Deal?," Auburn Economics Working Paper Series auwp2022-02, Department of Economics, Auburn University.
    4. Kevin Lefebvre & Nadia Rocha & Michele Ruta, 2023. "Containing Chinese state-owned enterprises? The role of deep trade agreements," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 159(4), pages 887-920, November.
    5. Yang, Yichen & Liu, Wen, 2024. "Free trade agreements and domestic value added in exports: An analysis from the network perspective," Economic Modelling, Elsevier, vol. 132(C).
    6. González-Rozada, Martín & Ruffo, Hernán, 2024. "Do trade agreements contribute to the decline in labor share? Evidence from Latin American countries," World Development, Elsevier, vol. 177(C).
    7. Dong, Weijian & Chen, Kanxiang & Liu, Xiaojun, 2023. "Role of regional trade agreements in enhancing investments in mineral resources projects in ASEAN," Resources Policy, Elsevier, vol. 85(PB).
    8. Wang, Xiaozhuo & Yang, Guang, 2025. "Does being embedded in RTA networks promote firm productivity? Evidence from Chinese firms," International Review of Economics & Finance, Elsevier, vol. 99(C).
    9. Cheyuan Liu & Jianrui Zhou & Wen Wen & Fangzhou Liu & Chunyu Zhang, 2025. "The impact of RCEP on labour markets in non-member economies: evidence from Taiwan, China," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-11, December.
    10. Mamba, Essotanam & Wonyra, Kwami Ossadzifo & Evlo, Kodjo, 2025. "Regional (economic) integration, political stability uncertainty and (intra-African) exports," Economic Systems, Elsevier, vol. 49(2).
    11. Mirco Balatti & M. Ayhan Kose & Kate McKinnon & Edoardo Palombo & Naotaka Sugawara & Guillermo Verduzco-Bustos & Dana Vorisek, 2025. "From Tailwinds to Headwinds: Emerging and Developing Economies in the Twenty-First Century," CAMA Working Papers 2025-44, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    12. Neri--Lainé,Matteo & Orefice,Gianluca & Ruta,Michele, 2023. "Deep Trade Agreements and Heterogeneous Firms Exports," Policy Research Working Paper Series 10277, The World Bank.

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    Keywords

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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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