Preferential Trade Agreements and Multinational Production

27 Pages Posted: 12 Feb 2019

See all articles by S. Miroudot

S. Miroudot

Organization for Economic Co-Operation and Development (OECD) - Trade Directorate (ECH)

Davide Rigo

Graduate Institute, Geneva (IHEID), Students

Date Written: February 2019

Abstract

This paper investigates the impact of deep integration in preferential trade agreements (PTAs) on multinational production (MP), i.e. the production carried out by firms outside of their country of origin. Using a structural gravity model, we find that tariff reductions have a positive impact on MP of goods. This effect is stronger for foreign affiliates trading intermediate inputs or serving the final demand. However, while deep provisions have no significant impact on foreign affiliates that produce goods, we find that deep integration provisions positively affects foreign affiliates operating in the service sector. These results suggest that the proliferation of PTAs with deep integration provisions has contributed to the growth of multinational production and facilitated the participation of foreign affiliates in global value chains.

Keywords: preferential trade agreements; multinational production; deep integration; services; investment

JEL Classification: F12, F14, F15, F23, L23

Suggested Citation

Miroudot, Sebastien and Rigo, Davide, Preferential Trade Agreements and Multinational Production (February 2019). Robert Schuman Centre for Advanced Studies Research Paper No. RSCAS 2019/14, Available at SSRN: https://ssrn.com/abstract=3332245 or http://dx.doi.org/10.2139/ssrn.3332245

Sebastien Miroudot (Contact Author)

Organization for Economic Co-Operation and Development (OECD) - Trade Directorate (ECH) ( email )

2, rue André-Pascal
Paris Cedex 16, 75775
France

Davide Rigo

Graduate Institute, Geneva (IHEID), Students ( email )

Switzerland

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