Trade Creation and Trade Diversion in Deep Agreements

41 Pages·2017·2.12 MB·English

by  Alen Mulabdic

Trade Creation and Trade
Diversion in Deep Agreements
AADITYA MATTOO, ALEN MULABDIC, MICHELE RUTA
Workshop on the “Economics of
International Trade Agreements”
Disclaimer: The views expressed in this article are
those of the authors and they do not necessarily Villars-sur-Ollon, February 2017
represent the views of the World Bank Group
Questions and motivation
• Since 1990 there has been a surge of preferential trade
agreements (PTAs).
• The nature of these agreements has been changing as well,
with PTAs covering measures beyond tariffs (“deep” PTAs).
• Questions:
• What policy areas do deep agreements cover?
• What are their trade effect on members and non-members?
• What would be the consequences of undoing US PTAs?
Deep trade agreements
Preview of main findings
• Content of PTAs
• The number of provisions has increased of a factor of 2 in the last
quarter century
• Viner revisited
• Deep agreements lead to more trade creation and less trade
diversion than shallow agreements
• Application
• Undoing US deep PTAs would have a large negative impact on the
US and its trade partners
Deep trade agreements
Literature review
• Content of PTAs
• Classification of US and EU PTAs (Horn et al. 2010)
• Extension to 100 PTAs (WTO, 2011)
• Extension to 279 PTAs (Hofmann et al. 2016)
• Trade Creation
• Dummies (e.g. Rose (2004))
• Type of agreements: one-way PTAs, two-way PTAs, FTAs,
customs unions, common markets and economic unions (Baier et
al. (2014))
• Trade Diversion
• Dummies (e.g. Dai et al. (2014))
• Continuous variables for trade diversion (Baldwin and Jaimovich
(2012); Fugazza and Nicita (2013))
Deep trade agreements
The content of PTAs
Since 1990 there has been a surge of preferential trade
agreements (PTAs)
35 300
30
250
25
200
20
150
15
100
10
50
5
0 0
195119531955195719591961196319651967196919711973197519771979198119831985198719891991199319951997199920012003200520072009201120132015
Number of PTAs Cumulative
Deep trade agreements
On average one country participates in fourteen
agreements
Deep trade agreements
The continuing proliferation of PTAs over the last 30
years involves a wide network of participants
Deep trade agreements
PTAs are also becoming “deeper”: Coverage in terms
of policy areas has widened over time
35 300
30
250
25
200
20
150
15
100
10
50
5
0 0
195119531955195719591961196319651967196919711973197519771979198119831985198719891991199319951997199920012003200520072009201120132015
More than 20 Between 10 and 20 Less than 10 Not in force Cumulative
Deep trade agreements
The Database: 279 Agreements
( )
http://data.worldbank.org/data-catalog/deep-trade-agreements
"WTO plus" "WTO extra"
areas covered by the WTO areas beyond the WTO
 Tariffs industrial goods  Anti-corruption  Financial assistance
 Tariffs agricultural goods  Competition policy  Health
 Customs administration  Environmental laws  Human Rights
 Export taxes  IPR  Illegal immigration
 SPS measures  Investment measures  Illicit drugs
 State trading enterprises  Labour market regulation  Industrial cooperation
 TBT measures  Movement of capital  Information society
 Countervailing measures  Consumer protection  Mining
 Anti-dumping  Data protection  Money laundering
 State aid  Approximation of legislation  Nuclear safety
 Public procurement  Agriculture  Political dialogue
 TRIMS measures  Audiovisual  Public administration
 GATS  Civil protection  Regional cooperation
 TRIPS  Innovation policies  Research and technology
 Cultural cooperation  SMEs
 Economic policy dialogue  Social Matters
 Education and training  Statistics
 Energy  Taxation
 Terrorism
 Visa and asylum