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

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  • Hayakawa, Kazunobu
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%).

Suggested Citation

  • Hayakawa, Kazunobu, 2012. "Impact of diagonal cumulation rule on FTA utilization : evidence from bilateral and multilateral FTAs between Japan and Thailand," IDE Discussion Papers 372, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper372
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    References listed on IDEAS

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    9. repec:oup:ecpoli:v:20:y:2005:i:43:p:567-624 is not listed on IDEAS
    10. Hayakawa, Kazunobu, 2011. "Measuring fixed costs for firms’ use of a free trade agreement: Threshold regression approach," Economics Letters, Elsevier, vol. 113(3), pages 301-303.
    11. Demidova, Svetlana & Krishna, Kala, 2008. "Firm heterogeneity and firm behavior with conditional policies," Economics Letters, Elsevier, vol. 98(2), pages 122-128, February.
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    Cited by:

    1. 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.
    2. Archanun Kohpaiboon & Juthathip Jongwanich, 2022. "Restrictiveness of RCEP Rules of Origin: Implications for Global Value Chains in East Asia," Chapters, in: Fukunari Kimura & Shujiro Urata & Shandre Mugan Thangavelu & Dionisius Narjoko (ed.), Dynamism of East Asia and RCEP: The Framework for Regional Integration, chapter 3, pages 39-69, Economic Research Institute for ASEAN and East Asia (ERIA).
    3. 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).
    4. 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).
    5. 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.
    6. Sytsma, Tobias, 2019. "Rules of Origin Liberalization with Multi-Product Firms: Theory and Evidence from Bangladeshi Apparel Exporters," MPRA Paper 95956, University Library of Munich, Germany.
    7. 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).
    8. Misa Okabe, . "The Impact of ASEAN +1 FTAs on ASEAN's Trade," Chapters, in: Lili Yan Ing (ed.), East Asian Integration (First Edition), chapter 2, pages 25-66, Economic Research Institute for ASEAN and East Asia (ERIA).
    9. Misa OKABE, 2015. "Impact of Free Trade Agreements on Trade in East Asia," Working Papers DP-2015-01, Economic Research Institute for ASEAN and East Asia (ERIA).
    10. 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).
    11. Blyde, Juan S. & Volpe Martincus, Christian & Molina, Danielken, 2014. "Fábricas sincronizadas: América Latina y el Caribe en la era de las Cadenas Globales de Valor," IDB Publications (Books), Inter-American Development Bank, number 6668, November.
    12. Kazunobu Hayakawa & Nuttawut Laksanapanyakul & Taiyo Yoshimi, 2021. "Tariff scheme choice," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 157(2), pages 323-346, May.
    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. Juan S. Blyde & Christian Volpe Martincus & Danielken Molina, 2014. "Fábricas sincronizadas: América Latina y el Caribe en la era de las Cadenas Globales de Valor," IDB Publications (Books), Inter-American Development Bank, number 86755 edited by Juan S. Blyde, February.
    15. 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).
    16. Legge, Stefan & Lukaszuk, Piotr, 2024. "The firm-level costs of utilizing free trade agreements," International Economics, Elsevier, vol. 178(C).

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    More about this item

    Keywords

    Thailand; Japan; Trade policy; International economic integration; International agreements; FTA; Tariff; Diagonal cumulation; Trade creation effect;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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