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Determinants on utilization of the Korea–ASEAN free trade agreement: margin effect, scale effect, and ROO effect

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  • HAYAKAWA, KAZUNOBU
  • KIM, HANSUNG
  • LEE, HYUN-HOON

Abstract

In this paper we empirically examine the determinants on utilization of the Korea–ASEAN Free Trade Agreement (KAFTA) by employing a database provided by the Korea Customs and Trade Development Institute. We find that, although three effects, namely preferential margin (margin effect), rules of origin restrictiveness (ROO effect), and average export volume (scale effect), contribute to determining the utilization of the FTA, the scale effect has the greatest impact. Our results suggest that, since firms with relatively small volumes of trade are usually small and medium-size enterprises (SMEs), policy assistance for reducing administrative costs should be geared toward SMEs. Our results further indicate that policymakers should also try to negotiate more extensive tariff reductions on products not only where MFN rates are high but also where shipments are large.

Suggested Citation

  • Hayakawa, Kazunobu & Kim, Hansung & Lee, Hyun-Hoon, 2014. "Determinants on utilization of the Korea–ASEAN free trade agreement: margin effect, scale effect, and ROO effect," World Trade Review, Cambridge University Press, vol. 13(3), pages 499-515, July.
    • Handle: RePEc:cup:wotrrv:v:13:y:2014:i:03:p:499-515_00
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    Citations

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    Cited by:

    1. Hayakawa, Kazunobu & Nuttawut, Laksanapanyakul & Shiino, Kohei, 2013. "Some practical guidance for the computation of free trade agreement utilization rates," IDE Discussion Papers 438, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    2. Kazunobu Hayakawa & Tadashi Ito & Fukunari Kimura, 2016. "Trade Creation Effects of Regional Trade Agreements: Tariff Reduction versus Non-tariff Barrier Removal," Review of Development Economics, Wiley Blackwell, vol. 20(1), pages 317-326, February.
    3. Kuo‐I Chang & Kazunobu Hayakawa & Nuttawut Laksanapanyakul & Dionisius Narjoko & Ju Hyun Pyun & Francis Quimba, 2022. "Determinants of regional trade agreement utilisation: Evidence from multiple import countries in Asia," The World Economy, Wiley Blackwell, vol. 45(6), pages 1713-1736, June.
    4. Lukaszuk, Piotr & Legge, Stefan, 2019. "Which Factors Determine the Utilization of Preferential Tariff Rates?," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203639, Verein für Socialpolitik / German Economic Association.
    5. Hayakawa, Kazunobu & Kim, HanSung & Yoshimi, Taiyo, 2015. "FTA in international finance : impacts of exchange rates on FTA utilization," IDE Discussion Papers 494, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    6. HAYAKAWA Kazunobu & URATA Shujiro & YOSHIMI Taiyo, 2017. "Choosing Between Multiple Preferential Tariff Schemes: Evidence from Japan's imports," Discussion papers 17002, Research Institute of Economy, Trade and Industry (RIETI).
    7. Kazunobu Hayakawa & Nuttawut Laksanapanyakul & Shujiro Urata, 2016. "Measuring the costs of FTA utilization: evidence from transaction-level import data of Thailand," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(3), pages 559-575, August.
    8. Hayakawa, Kazunobu & Mukunoki,Hiroshi & Kimura,Fukunari & Urata,Shujiro, 2023. "Determinants of the rules of origin in regional trade agreements in Asia," IDE Discussion Papers 882, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    9. Hayakawa, Kazunobu & Kim, Han-Sung & Yoshimi, Taiyo, 2017. "Exchange rate and utilization of free trade agreements: Focus on rules of origin," Journal of International Money and Finance, Elsevier, vol. 75(C), pages 93-108.
    10. Hayakawa, Kazunobu & Laksanapanyakul, Nuttawut & Yoshimi, Taiyo, 2023. "Firm-level Utilization Rates of Regional Trade Agreements: Importers’ Perspective," Journal of Asian Economics, Elsevier, vol. 86(C).
    11. Kazunobu Hayakawa & Fukunari Kimura & Nuttawut Laksanapanyakul, 2018. "Measuring the usage of preferential tariffs in the world," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 154(4), pages 705-723, November.
    12. ANDO Mitsuyo & URATA Shujiro & YAMANOUCHI Kenta, 2022. "Effects of Product-Specific Rules of Origin on Trade in Free Trade Agreements: Evidence from the cases of Japan," Discussion papers 22035, Research Institute of Economy, Trade and Industry (RIETI).
    13. Kazunobu Hayakawa, 2020. "Production Networks and Utilization of Free Trade Agreements by Japanese Subsidiaries in ASEAN," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 16(1), pages 121-134, February.
    14. ANDO Mitsuyo & URATA Shujiro, 2018. "Determinants of FTA Utilization for Japan's Imports: Preferential margins and restrictiveness of rules of origin," Discussion papers 18078, Research Institute of Economy, Trade and Industry (RIETI).
    15. Legge, Stefan & Lukaszuk, Piotr, 2024. "The firm-level costs of utilizing free trade agreements," International Economics, Elsevier, vol. 178(C).

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