Abstract
Can free trade agreements (FTAs) evade technical barriers to trade (TBT)? Based on the FTAs and TBT notification of the United States, this paper addresses this question using detailed product-level trade data of the period 2000–2017. It shows that, for the products covered by the US TBT notifications, Chinese exports to third countries that are part of the FTA trade bloc with the US are positively correlated to the imports by the US from the same countries. However, the authors do not find a bypass effect of FTA in evading technical barriers as regards trade with several other countries. Furthermore, the bypass evidence is stronger for countries near China that have similar institutional qualities, better political relations with China, a larger Chinese population, an FTA, and commonality in language with China, and where the rerouting cost is low for Chinese exporters.
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Notes
For example, in US-Australian FTA, TBT Chapter includes scope and coverage, affirmation of the TBT agreement, regional governments, international standards, technical regulations, conformity assessment procedures, transparency, trade facilitation, chapter coordinators and information exchange. Of course, dropping Israel and Jordan will not change our results.
In empirical regression, we omit the zero trade of China distinguishing from the US imports i.e., USijt. When introduced jointly with zero value of China’s export, the joint effect CH × FTA × TBT is positive and significant while the coefficient of CH stays significant but the coefficient turns negative. It is difficult to make any sense of this result compared with the previous results. Another reason we do this is to avoid some statistical errors in some extent and mainly investigate the bypass effect on the intensive margin of Chinese exports.
This possible candidate may also have its own problem since later we do not find similar results from other countries.
The data are collected via the Demographic Yearbook census questionnaires. However, the data is highly incomplete, and this is the reason the number of observations is so small compared to others (Source: https://unstats.un.org/unsd/demographic-social/products/dyb/dybcensusdata.cshtml).
The Worldwide Governance Indicators (WGI) report on six broad dimensions of governance: (I) Voice and Accountability; (II) Political Stability and Absence of Violence; (III) Government Effectiveness; (IV) Regulatory Quality; (V) Rule of Law; and (VI) Control of Corruption. We normalized six indices and calculated the average value.
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Acknowledgements
We thank the Editor and Professor Gerald Willmann and two anonymous referees for their insightful comments. All the remaining errors are our own. Generous financial support was given by the National Natural Science Foundation of China (71773148 and 72073128). Authors are in alphabetical order and contribute equally to the paper.
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Li, Y., Lin, F. Beyond tariff evasion: bypass effect of FTAs to circumvent technical barriers. Rev World Econ 158, 1085–1105 (2022). https://doi.org/10.1007/s10290-022-00455-4
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DOI: https://doi.org/10.1007/s10290-022-00455-4