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RTA exit and trade: Evidence from losing shared trade agreement

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  • Yao, Zhixiao

Abstract

This paper provides the first global empirical evidence on the trade effects of losing shared regional trade agreement (RTA) coverage. Moving beyond single RTA exit cases, I study worldwide bilateral trade flows from 1980 to 2016 and estimate the effect of de-coverage using a structural gravity model together with a heterogeneity-robust staggered difference-in-differences design. I find that de-coverage reduces bilateral trade by about 37% on average, a magnitude similar to the gains from RTA formation. A key contrast with the RTA entry literature is its dynamics: while trade gains from RTA formation build up gradually over time, the adjustment to de-coverage is front-loaded. Heterogeneity analysis shows larger losses for dyads with longer prior RTA histories, geographically distant partners, and country pairs with asymmetric income levels. Product-level estimates show declines concentrated in intermediate and consumption goods.

Suggested Citation

  • Yao, Zhixiao, 2026. "RTA exit and trade: Evidence from losing shared trade agreement," CEPIE Working Papers 01/26, Technische Universität Dresden, Center of Public and International Economics (CEPIE).
    • Handle: RePEc:zbw:tudcep:342518
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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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