Impact of diagonal cumulation rule on FTA utilization: evidence from bilateral and multilateral FTAs between Japan and Thailand

Kazunobu Hayakawa

No 372, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: In this paper, we empirically investigate the effect of diagonal cumulation on free trade agreement (FTA) utilization by exploring Thai exports to Japan under two kinds of FTA schemes. While the one scheme adopts bilateral cumulation, the other scheme does diagonal cumulation. Comparing trade under these two kinds of FTAs, we can examine the effect of diagonal cumulation without relying on not only the variation in cumulation rules across country pairs but also the variation across years. In short, our estimates do not suffer from biases from time-variant elements and country pair-specific elements. As a result, our estimates show around 4% trade creation effect of diagonal cumulation, which is much smaller than the estimates in the previous studies (around 15%).

Keywords: Thailand; Japan; Trade policy; International economic integration; International agreements; FTA; Tariff; Diagonal cumulation; Trade creation effect (search for similar items in EconPapers)
JEL-codes: F13 F15 F23 (search for similar items in EconPapers)
Date: 2012-11-01
New Economics Papers: this item is included in nep-int and nep-sea
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Citations: View citations in EconPapers (3)

Published in IDE Discussion Paper = IDE Discussion Paper, No. 372. 2012-11-01

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Journal Article: Impact of diagonal cumulation rule on FTA utilization: Evidence from bilateral and multilateral FTAs between Japan and Thailand (2014)
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