Choosing between multiple regional trade agreements: Evidence from Japan’s imports

Abstract

Mega‐regional trade agreements (RTAs) are likely to overlap with other RTAs. When such overlaps occur, firms must choose the tariff rates from multiple RTAs. By employing data on Japan’s imports by tariff schemes, we investigate how RTA tariff rates affect firms’ decisions on tariff schemes when multiple RTAs exist. Our finding is that RTA utilization rates are higher when tariff rates for that RTA are lower (own effect) and tariff rates for alternative RTAs are higher (cross effect). We also found that the absolute magnitudes of own and cross effects are larger in bilateral and multilateral RTAs, respectively.

Determinants of regional trade agreement utilisation: Evidence from multiple import countries in Asia

“…Unlike Hayakawa et al (2019), we aggregate imports under all RTA regimes and do not examine those under each RTA regime because the number of available RTAs differs by countries.…”

“…For example, Hayakawa et al (2017) investigated the effect of exchange rates and discovered that an appreciation in the exporting country's currency reduces RTA utilisation rates. Hayakawa (2014) examined the effect of the cumulation rule in RoOs, and Hayakawa et al (20192018) investigated the impact of other available RTA tariff rates. In sum, these studies revealed the significant effects of various elements on preference utilisation.…”

Labor Market Impacts of Import Penetration from China and Regional Trade Agreement Partners: The Case of Japan

“…Our innovation is to introduce imports under RTA regimes into the context of the effects on the domestic labor market. Although some strands of literature on RTA use employed import data by tariff regime (e.g., Bureau, Chakir, and Gallezot 2007; Cadot et al 2005; Cirera 2014; Francois, Hoekman, and Manchin 2006; Hayakawa, Urata, and Yoshimi 2019; Özden and Sharma 2006), to the best of our knowledge, this study is the first one that uses such data to examine the effects of RTAs on the labor market.…”

Tariff scheme choice

“…Studies on the determinants of choosing preference schemes typically explore cases where a single preference scheme is available in addition to an MFN clause (e.g., Ju and Krishna 2005;Cadot et al 2006;Cadot and de Melo 2007;Francois et al 2006;Manchin 2006;Hakobyan 2015). Similar studies have been conducted with two preferential schemes and an MFN scheme (e.g., Bureau et al 2007;Hayakawa 2014;Hayakawa et al 2019). However, the empirical method we propose in this study is the nested logit model with two stages, which is based on a theoretical study on a firm's tariff scheme choice (Demidova and Krishna 2008;Cherkashin et al 2015) and can easily expand the number of alternatives (i.e., RTAs).…”