Selection and utilization of the early harvest list: evidence from the Free Trade Agreement between China and Taiwan

Kuo-I Chang and Kazunobu Hayakawa

No 365, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: In this paper, we conducted an empirical investigation into the determinants of FTA utilization in exports from Taiwan to China. To do this, we first estimated the selection equation to see what kinds of products are included in the early harvest list. As a result, we found that Taiwan includes products with a medium magnitude of benefits from tariff removal in the early harvest list. Taiwan also includes products for which ASEAN countries have better access to the China market. We then estimated the equation for the determinants of FTA utilization by introducing an inverse of the Mills ratio estimated in the selection equation. The findings are that, as usual, the FTA rates are more likely to be utilized for products with a larger tariff margin. In addition, some rules of origin are found to be relatively restrictive in terms of discouraging trade.

Keywords: China; Taiwan; International trade; FTA; International economic integration; Utilization (search for similar items in EconPapers)
JEL-codes: F15 F23 F53 (search for similar items in EconPapers)
Date: 2012-08-01
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Published in IDE Discussion Paper = IDE Discussion Paper, No. 365. 2012-08-01

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