Sensitive Sectors in Free Trade Agreements

23 Pages Posted: 2 Jan 2019

See all articles by Alan V. Deardorff

Alan V. Deardorff

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy; University of Michigan at Ann Arbor - Department of Economics

Date Written: December 30, 2018

Abstract

This paper documents the presence of "sensitive sectors" in Free Trade Agreements, defined as sectors for which the within-FTA tariffs remain positive. The paper includes some brief theoretical discussion of the welfare implications of these, but the main emphasis is on reporting two measures of this phenomenon for countries in FTAs that entered into force between 1994 and 2003. One measure is the percentage of tariff lines that remain dutiable, and the second is the change, from before the FTA to after, in the average maximum (across 6-digit products) positive tariffs. Both measures are derived from data in the UNCTAD TRAINS database, and are then related to measures of country characteristics that might explain them. Low per capita GDP countries tend to have larger fractions of dutiable tariff lines, while higher income countries tend to post larger increases in average maximum positive tariffs. Both suggest that the favored treatment of sensitive sectors is undermining the potential gains from trade that FTAs could provide.

Keywords: Free Trade Agreements, Sensitive Sectors, Exempted Sectors, Trade Diversion, Tariff Lines

JEL Classification: F10, F13, F15

Suggested Citation

Deardorff, Alan V., Sensitive Sectors in Free Trade Agreements (December 30, 2018). East Asian Economic Review Vol. 22, No. 4 (December 2018) 403-425, DOI: http://dx.doi.org/10.11644/KIEP.EAER.2018.22.4.349 . Available at SSRN: https://ssrn.com/abstract=3309042 or http://dx.doi.org/10.2139/ssrn.3309042

Alan V. Deardorff (Contact Author)

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy ( email )

735 South State Street, Weill Hall
Ann Arbor, MI 48109
United States

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
458 Lorch Hall
Ann Arbor, MI 48109-1220
United States
313-764-6817 (Phone)
313-764-2769 (Fax)

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