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GTAP Resources: Resource Display

GTAP Resource #6214

"Can behind-border measures in free trade agreements benefit domestic firms?"
by Li, Qiaomin and John Gilbert

The competition effect on domestic industries is one factor that restrains countries from joining free trade agreements (FTAs). Behind-border measures (BBMs) may alleviate the competition effect
by addressing regulatory barriers that raise costs to foreign firms and domestic firms. This paper investigates the benefits of BBMs to domestic firms by adopting a computable general equilibrium (CGE) model. Rooted in the firm heterogeneity theory, the CGE model treats BBMs as impacting on fixed costs. Using the recently signed Regional Comprehensive Economic Partnership (RCEP) as an example, we find that by reducing fixed costs of domestic firms, BBMs can promote firm numbers and sales. BBMs not only can stop the reduction of firm numbers caused by trade competition, but also can encourage new firms to enter the market. In addition, BBMs can promote sales of domestic firms in foreign and local markets. Even though firms of Japan would reduce sales in the local market, the sales reduction becomes smaller with BBMs than without. We also simulate with India joining the RCEP. Results show that the competition effect for India is only significant in the agriculture sector. BBMs can increase India’s total sales of all sectors to both foreign and local markets.

Resource Details (Export Citation) GTAP Keywords
Category: 2021 Conference Paper
Status: Not published
By/In: Presented during the 24th Annual Conference on Global Economic Analysis (Virtual Conference)
Date: 2021
Created: Li, Q. (4/7/2021)
Updated: Li, Q. (4/7/2021)
Visits: 715
- Non-Tariff barriers
- Preferential trading arrangements

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