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Impact of Free Trade Agreement Use on Import Prices

Author

Listed:
  • Kazunobu Hayakawa
  • Nuttawut Laksanapanyakul
  • Hiroshi Mukunoki
  • Shujiro Urata

Abstract

We examine the impact of free trade agreement (FTA) use on import prices. For this analysis, we employ establishment-level import data with information on tariff schemes, that is, the FTA and most-favored-nation schemes used for importing. Unlike previous studies, we estimate the effects of FTA use on prices by controlling for differences in importing-firm characteristics. There are three main findings. First, the effect of FTA use is overestimated when not controlling for importing firm-related fixed effects. Second, on average, firms’ FTA use reduces tariffs by 12 percentage points and raises import prices by 3.6–6.7 percent. Third, in general, we do not find a price rise resulting from the costs of complying with rules of origin.

Suggested Citation

  • Kazunobu Hayakawa & Nuttawut Laksanapanyakul & Hiroshi Mukunoki & Shujiro Urata, 2019. "Impact of Free Trade Agreement Use on Import Prices," The World Bank Economic Review, World Bank, vol. 33(3), pages 643-660.
    • Handle: RePEc:oup:wbecrv:v:33:y:2019:i:3:p:643-660.
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    File URL: http://hdl.handle.net/10.1093/wber/lhx026
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    Cited by:

    1. Hiroshi Mukunoki & Hirofumi Okoshi, 2021. "Rules of origin and consumer‐hurting free trade agreements," The World Economy, Wiley Blackwell, vol. 44(8), pages 2303-2318, August.
    2. 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.
    3. Kjersti Nes & K. Aleks Schaefer & Daniel P. Scheitrum, 2022. "Global Food Trade and the Costs of Non‐Adoption of Genetic Engineering," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(1), pages 70-91, January.

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