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The Impact of Deep Preferential Trade Agreements on (Global Value Chain) Trade: Who Signs Them Matters

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  • Seungho Lee
  • Chong-Sup Kim

Abstract

This paper investigates the impact of deep preferential trade agreements (PTAs) on total and global value chain (GVC) trade flows. We employ an augmented gravity equation that includes three-dimensional fixed effects, using a panel dataset covering the 1995–2015 period that includes newly available data for the policy areas covered by existing PTAs. Results show that the presence of PTAs has an overall positive impact on (GVC) trade flows and that deep PTAs are more effective in increasing (GVC) trade flows than shallow PTAs. These results confirm the need to consider the heterogeneity of agreements when estimating the effect of PTAs on (GVC) trade flows. However, the channels through which deep integration influences (GVC) trade flows differ across PTA signatories. We find that the heterogeneous effects of deep PTAs across the income level and geographical origin of bilateral signatories are driven by different groups of provisions in PTA agreements.

Suggested Citation

  • Seungho Lee & Chong-Sup Kim, 2022. "The Impact of Deep Preferential Trade Agreements on (Global Value Chain) Trade: Who Signs Them Matters," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(6), pages 1629-1638, May.
    • Handle: RePEc:mes:emfitr:v:58:y:2022:i:6:p:1629-1638
    DOI: 10.1080/1540496X.2021.1917359
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    Cited by:

    1. Narayan, Paresh Kumar & Rath, Badri Narayan & Syarifuddin, Ferry, 2022. "Understanding the role of trade agreements in Indonesia’s FDI," Journal of Asian Economics, Elsevier, vol. 82(C).
    2. Yang, Yichen & Liu, Wen, 2024. "Free trade agreements and domestic value added in exports: An analysis from the network perspective," Economic Modelling, Elsevier, vol. 132(C).
    3. Fan, Zhaobin & Zhou, Ying & Anwar, Sajid, 2024. "Centralization of trade agreements network and global value chain participation," The Quarterly Review of Economics and Finance, Elsevier, vol. 94(C), pages 11-24.

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