Impact of free trade agreements
One size does not fit all: On the heterogeneous impact of free trade agreements
Can empirical research on past FTAs shed light on this uncertainty? To date, most studies that quantify the effects of trade agreements have either focused on obtaining a common average effect across all agreements (e.g. Baier and Bergstrand 2007, Anderson and Yotov 2016) or have assumed that the effects are common across similar types of agreements (e.g. Baier et al. 2014). A small literature, including works by Carrère (2006) and Kohl (2014), has documented that different individual FTAs – even ostensibly similar ones – can have very different effects on trade. However, while the principle that the effects of FTAs may be heterogeneous is generally well-understood, an intuitive understanding of the sources of this heterogeneity remains elusive. Aside from variation in tariffs, few theoretically grounded arguments exist for why one agreement should have a larger impact on trade than another, let alone why the same agreement might affect different members in different ways.