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

34 Pages Posted: 21 Nov 2019 Last revised: 26 Nov 2019

See all articles by Woori Lee

Woori Lee

University of Geneva - Graduate Institute, Geneva (IHEID); World Bank

Alen Mulabdic

World Bank

Michele Ruta

Economic Research Division, WTO; Columbia Business School - Economics Department; International Monetary Fund (IMF)

Date Written: November 20, 2019

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.

Keywords: International Trade and Trade Rules, Energy and Mining, Trade Policy, Adaptation to Climate Change, Trade and Multilateral Issues

Suggested Citation

Lee, Woori and Mulabdic, Alen and Ruta, Michele, Third-Country Effects of Regional Trade Agreements: A Firm-Level Analysis (November 20, 2019). World Bank Policy Research Working Paper No. 9064, Available at SSRN: https://ssrn.com/abstract=3491254

Woori Lee (Contact Author)

University of Geneva - Graduate Institute, Geneva (IHEID) ( email )

Geneva
Switzerland

World Bank

1818 H Street, NW
Washington, DC 20433
United States

Alen Mulabdic

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Michele Ruta

Economic Research Division, WTO ( email )

Rue de Lausanne 154
CH-1211 Geneva
Switzerland

HOME PAGE: http://www.iue.it/Personal/Fellows/MicheleRuta/Welcome.htm

Columbia Business School - Economics Department ( email )

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New York, NY 10027
United States

International Monetary Fund (IMF) ( email )

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Washington, DC 20431
United States

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