Do Deep Trade Agreements Boost Vertical FDI?

Osnago, Alberto; Rocha, Nadia; Ruta, Michele

doi:10.1093/wber/lhw020

Cited by 41 publications

(43 citation statements)

References 8 publications

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“…We distinguish impacts of reducing and eliminating MFN tariffs from those generated via enhanced trade policy certainty. This integrates insights of a more recent literature, which finds that trade policy certainty underpins imports (Groppo and Piermartini, 2014;Osnago et al, 2015) as well as fosters exports through FDI-driven development of domestic export industries (Antràs and Helpman, 2008;Gawande et al, 2011;Limão, 2013, 2015;Osnago et al, 2016). 15 Third, our work adds to large literatures on trade agreements and international production sharing (e.g., Antràs and Staiger, 2012).…”

Section: Relation To Previous Literaturesupporting

confidence: 72%

Peeling away the layers: Impacts of durable tariff elimination

Gnutzmann‐Mkrtchyan

Henn

2018

Journal of International Economics

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We demonstrate that durable MFN tariff elimination affects trade patterns through several layers, and magnitudes of effects are sizable. The WTO Information Technology Agreement's (ITA) unique setting allows us to overcome the challenges associated with identifying effects of non-discriminatory trade policies due to two reasons: (i) ITA constitutes a quasi-natural experiment of several "passive" signatories joining the agreement as an unavoidable part of pursuing a larger policy objective, and (ii) ITA's partial coverage of the IT sector provides a natural control group for identification based on cross-product variation. Our analysis finds novel nonlinear impacts of tariff liberalization: Complete tariff elimination results in large additional trade gains -over and above tariff reductions -especially for intermediate goods. The commitment to durable tariff elimination, through WTO bindings, adds a further two layers, boosting both imports and exports more than equivalent unilateral reforms. This commitment spurned development of a downstream IT export sector in "passive" signatories. JEL-Codes: F130, F140, F150, L630.

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Section: Relation To Previous Literaturesupporting

confidence: 72%

Peeling away the layers: Impacts of durable tariff elimination

Gnutzmann‐Mkrtchyan

Henn

2018

Journal of International Economics

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“…We focus on five aspects of trade policy: (1) investment protection, (2) reduction of tariff and nontariff barriers, (3) export subsidies, (4) use of dispute settlement mechanisms, and (5) flexibility of international commitments. We chose these five aspects of trade policy because they are the most prominent dimensions in contemporary trade agreements (e.g., Büthe and Milner, 2008;Dür, Baccini, and Elsig, 2014;Osnago, Rocha, and Ruta, 2017). All five affect either the prices of goods and services produced by firms or the costs firms face from other governments' policies on trade.…”

Section: A Paired Profiles Conjoint Designmentioning

confidence: 99%

Firms and Global Value Chains: Identifying Firms’ Multidimensional Trade Preferences

Kim

Milner

Bernauer

et al. 2019

International Studies Quarterly

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Trade policy has become increasingly multidimensional. Current trade agreements not only address market access but also encompass rules and provisions related to flexibility of commitment, investment protection, and dispute settlement mechanisms. Yet, rigorous evidence about how interest groups evaluate each policy measure in relation to others remains scarce. We develop a firm-level theoretical framework to explain how firms' international operations affect their preferences on different trade policy measures. We experimentally evaluate preferences over multiple policy dimensions using a conjoint analysis on firms in Costa Rica. Notably, for many types of firms, the standard trade policy measures of yesteryear -tariffs and subsidies -are no longer their most important concerns. Instead, the degree of firms' involvement in global value chains shapes their preferences. Multinational corporations care most about protection of their foreign investments. Strong dispute settlement procedures are most valued by exporters who are not central to global supply networks. Finally, preferences over these policy dimensions are more likely to vary by firm, not by industry, challenging the conventional focus on inter-industry distinctions in the literature.

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“…In terms of the relationship between bilateral trade liberalisation (or bilateral trade) and FDI, several works report evidence of a substitution between both (Antras & Yeaple, 2014;Blonigen, 2001;Brainard, 1997;Daniels & von der Ruhr, 2014;Jang, 2011), while others find a complementarity (Berger, Busse, Nunnenkamp, & Roy, 2013;Chiappini, 2016;Clausing, 2000;Habib & Zurawicki, 2002;Osnago, Rocha, & Ruta, 2016;Paniagua & Sapena, 2014). In the case of M&As, existing evidence tends to support a complementarity with bilateral trade liberalisation (Coeurdacier, Santis, & Aviat, 2009;Erel et al, 2012;Hyun & Kim, 2010;Rossi & Volpin, 2004) or find a non-significant relationship (di Giovanni, 2005).…”

Section: Literature Reviewmentioning

confidence: 99%

Mergers and acquisitions & trade: A global value chain analysis

Carril-Caccia

Pavlova

2019

World Economy

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The present paper deals with how the insertion in international trade and global value chains (GVCs) of countries affects their capacity of attracting foreign mergers and acquisitions (M&As). To this end, we combine data for bilateral M&As and trade in value added for the period 2001–15 and estimate an augmented gravity equation. Results indicate that trade openness per se does not favour M&As. Nevertheless, bilateral free trade agreements, heterogeneity of destinations (sources) for exports (imports) of intermediate and final goods, and position and participation in global value chains are relevant for explaining bilateral M&As. Moreover, their role is significantly different depending on the level of development of the home and host countries.

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Do Deep Trade Agreements Boost Vertical FDI?

Cited by 41 publications

References 8 publications

Peeling away the layers: Impacts of durable tariff elimination

Peeling away the layers: Impacts of durable tariff elimination

Firms and Global Value Chains: Identifying Firms’ Multidimensional Trade Preferences

Mergers and acquisitions & trade: A global value chain analysis

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