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Trade Performance of Free Trade Zones

Author

Listed:
  • Jean-Marc Siroën

    (PSL, Université Paris-Dauphine,LEDa, IRD UMR DIAL, 75016 Paris, France)

  • Ayçil Yücer

    (University of Dokuz Eylül,Department of Economics, Izmir 35160 Turkey, PSL, Université Paris-Dauphine, LEDa, IRD UMR DIAL, 75016 Paris, France)

Abstract

Free trade zones (FTZ) have become widespread with the liberalisation of international trade and investment. They are a key player in the deepening of the global value chain (GVC). However, little is known about their contribution to world trade due to a lack of information on their location and status. This paper sets out to improve knowledge in this area by analysing the trade performance of FTZ countries at macro-level with a focus on FTZ externalities and distortive costs. We have built an original database of FTZs where we define them as processing zones benefiting from import tariff incentives. We show that FTZs raise trade only by easing the negative impact of protection. As importers of components and raw materials, they raise the rest of the world’s exports. This confirms the contribution of FTZs to the GVC. This result is robust to a change in the model specification, errors and bias due to data collection issues and sample composition. _________________________________ Les zones de libre-échange (ZFE) ont proliféré avec la libéralisation du commerce et de l’investissement. Elles jouent un rôle clé dans l’approfondissement de la chaîne mondiale de valeur. Toutefois, leur contribution au commerce international est peu connue, du fait du manque d’informations sur leur localisation et leur statut. Cet article tente d’améliorer leur connaissance en analysant les performances commerciales des pays abritant des ZFE avec un focus sur les externalités et les coûts dus aux distorsions. Nous avons ainsi construit une base de données originale sur les ZFE définies comme des zones de transformation industrielle bénéficiant d’incitations sur les droits de douane. Nous montrons que les ZFE ne contribuent à augmenter le commerce du pays qu’en réduisant l’impact négatif du protectionnisme. En tant qu’importateurs de composants et de matières premières, elles augmentent les exportations des autres pays, ce qui confirme la contribution des ZFE à la chaîne globale de valeur. Ce résultat est robuste avec d’autres spécifications du modèle, les erreurs et les biais dus aux problèmes de collecte des données et de composition de l’échantillon.

Suggested Citation

  • Jean-Marc Siroën & Ayçil Yücer, 2014. "Trade Performance of Free Trade Zones," Working Papers DT/2014/09, DIAL (Développement, Institutions et Mondialisation).
    • Handle: RePEc:dia:wpaper:dt201409
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    References listed on IDEAS

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    Cited by:

    1. Izotov, D., 2018. "The Desire to Speed up the Russian Far Eastern Economy: Will the "New" Institutional Conditions Help?," Journal of the New Economic Association, New Economic Association, vol. 38(2), pages 155-163.
    2. Louisiana Cavalcanti Teixeira, 2020. "Labor standards and social conditions in free trade zones: the case of the Manaus free trade zone," Post-Print hal-02997102, HAL.
    3. Teixeira, Louisiana Cavalcanti, 2020. "Labor standards and social conditions in free trade zones: The case of the Manaus free trade zone," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 14, pages 1-41.
    4. Bei Wang & Hong Chen & Ruiqi Chen & Weiting Zeng & Lechuan Ye, 2023. "Does the Green Development of Cities Need High-Level Opening Up? A Quasi-Natural Experiment Based on China’s Pilot Free Trade Zone," Sustainability, MDPI, vol. 15(7), pages 1-20, March.
    5. World Bank, 2016. "Moldova Trade Study," World Bank Publications - Reports 24006, The World Bank Group.
    6. Cavalcanti Teixeira, Louisiana, 2019. "Labor standards and social conditions in free trade zones: The case of the Manaus free trade zone," Economics Discussion Papers 2019-69, Kiel Institute for the World Economy (IfW Kiel).

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    More about this item

    Keywords

    Free Trade Zones; Export Processing Zones; Trade Policy; Gravity Models; Zones franches commerciales; Zones franches de transformation pour l'exportation; Politique commerciale; Modèle de gravité.;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development

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