Determinants of Regional Trade Agreement Utilization: Evidence from Multiple Import Countries in Asia

Discussion Papers

No.792

by Kuo-I Chang, Kazunobu Hayakawa, Nuttawut Laksanapanyakul, Dionisius Narjoko, Ju Hyun Pyun, Francis Quimba

June 2020

ABSTRACT

This study empirically examines the determinants of the utilization of regional trade agreements (RTAs). To this end, RTA utilization data with rich country variations in both importing and exporting countries are used. Specifically, the data include trade data among 16 exporters and six importers in Asia. An “RTA utilization rate,” which is defined as the share of imports under RTA regimes out of total imports of RTA-eligible products, is computed. The RTA utilization rate is regressed at a country pair-product level on various elements. As a result, the RTA utilization rate is found to be higher when the preference margin is larger, the importer’s demand is larger, the exporter’s income is lower, and the importer’s border handling is more efficient. Furthermore, RTA utilization rates are lower when a generalized scheme for preferences for least developed countries is available, when exporting finished products, and when the inward foreign direct investment in the importing country is larger.

Keywords: Regional trade agreement, Utilization, Asia

JEL classification: F15, F53

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