Gravity with multiple tariff schemes

This study contributes to the literature on gravity analysis by explicitly incorporating both most favored nation (MFN) rates and regional trade agreement (RTA) rates. Our gravity equation considers the fact that all exporters do not necessarily utilize RTA schemes, even when exporting to their RTA partners. We apply the tariff line–level data on worldwide trade to this gravity equation. As a result, we find a significantly negative coefficient for the (log) ratio of RTA rates to MFN rates. From the quantitative point of view, we show that in the first year of the Japan–Australia Economic Partnership (i.e., 2015), exports from Australia to Japan are expected to increase by 6% compared with the exports in 2014. Furthermore, it is shown that, based on the subsequent reduction in RTA rates, the magnitude of the trade-creation effect through tariff reductions gradually rises over time.

Does the use of multiple FTAs force firms to raise local input share? : evidence of the spaghetti bowl phenomenon

This paper empirically investigates the firm-level relationship between the local input share and the number of used FTAs by employing the data on FTA utilization in Japanese affiliates in ASEAN. As a result, we do not find a robust linear relationship. However, affiliates using a large number of FTAs (seven or eight) have an extremely higher share of local inputs. This result might be interpreted as the first evidence of the “spaghetti bowl phenomenon”.