Premium
Trade Creation Effects of Regional Trade Agreements: Tariff Reduction versus Non‐tariff Barrier Removal
Author(s) -
Hayakawa Kazunobu,
Ito Tadashi,
Kimura Fukunari
Publication year - 2016
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/rode.12208
Subject(s) - tariff , international economics , economics , gravity equation , trade creation , trade barrier , gravity model of trade , regional trade , trade diversion , commercial policy , international trade , free trade , international free trade agreement , bilateral trade , geography , archaeology , china
This study uses the most disaggregated tariff line‐level trade data in a large number of countries in the world to empirically decompose the trade creation effects of regional trade agreements ( RTA s) into those owing to tariff reduction and those owing to non‐tariff barrier ( NTB ) removal. Specifically, utilizing our detailed dataset, we employ the standard gravity equation and identify those effects by estimating the trade creation effects of RTA s for ineligible and eligible products for RTA preferential schemes separately. Our major findings are as follows. First, for the whole sample, there are significantly positive trade creation effects owing to tariff reduction while the effects for NTB removal are weak. Second, the trade creation effects of tariff reduction and NTB removal are substantially large in the case of trade among low‐income countries but weak among high‐income countries.