Deep Trade Agreements and Vertical FDI : The Devil Is in the Details
Recent data show that the institutional content of preferential trade agreements has evolved over time. Although pre-1990s preferential trade agreements mostly focused on tariff liberalization, recent agreements increasingly contain deep provisions...
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World Bank, Washington, DC
2015
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| Online Access: | http://documents.worldbank.org/curated/en/2015/10/25225132/deep-trade-agreements-vertical-fdi-devil-details http://hdl.handle.net/10986/22885 |
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okr-10986-228852021-06-14T10:17:37Z Deep Trade Agreements and Vertical FDI : The Devil Is in the Details Osnago, Alberto Rocha, Nadia Ruta, Michele TARIFFS MULTILATERAL TRADE WORLD TRADE ORGANIZATION INTERNATIONAL ECONOMIC LAW PRODUCTION TRADE EFFECTS FOREIGN DIRECT INVESTMENTS MULTINATIONAL CORPORATIONS TRADE STRUCTURE DISPUTE SETTLEMENT TRADE RULES EXPECTATIONS PROPERTY RIGHTS GDP PER CAPITA EXPORTS DOMESTIC MARKET PARENT FIRM POLITICAL ECONOMY INCENTIVES INTELLECTUAL PROPERTY RIGHTS ECONOMIC POLICY FREE TRADE AGREEMENTS VARIABLES PREFERENTIAL MARKET ACCESS INPUTS OWNERSHIP DECISIONS DUMPING TREATIES MARKET ACCESS FREE TRADE INTERNATIONAL BANK PROTECTIONISM INTERNATIONAL CONTRACTS FOREIGN INVESTMENTS BORDER MEASURES TRADE AGREEMENTS FINAL GOODS PRODUCTION PROCESS CHOICE GROSS EXPORTS PREFERENTIAL TRADE AGREEMENTS LEGAL SYSTEMS FOREIGN PRODUCTION TARIFF DATA EXOGENOUS SHOCKS GLOBAL ECONOMY ORGANIZATIONAL FORM MULTINATIONAL FIRM FOREIGN SUPPLIERS REDUCTION IN TARIFFS REGIONAL TRADE AVERAGE TARIFFS FIXED COSTS CUSTOMS SPECIALIZATION ECONOMETRICS PRODUCTIVITY FINANCIAL INSTITUTIONS CRITERIA WTO FOREIGN ASSETS ACCESS COUNTERVAILING MEASURES PROTECTION OF INTELLECTUAL PROPERTY RIGHTS TRADE POLICY EXPORT TAXES TRADE AGREEMENT RULE OF LAW ECONOMIC RESEARCH TAXES MULTILATERAL AGREEMENTS INTERNATIONAL PRODUCTION INTERNATIONAL TRADE REGIONALISM INTERNATIONAL INVESTMENT COMPETITION POLICY WAGE INEQUALITY VALUE COMPETITIVENESS FOREIGN DIRECT INVESTMENT EUROPEAN UNION PATENTS MULTILATERAL RULES INVESTMENT TREATIES INTERMEDIATE” GOODS MEASUREMENT INTERNATIONAL AGREEMENTS ECONOMIC LAW TRADE DIVERSION MULTINATIONAL FIRMS PROFITABILITY LABOR STANDARDS TRADE DATA TRADE MUTUAL RECOGNITION GDP GOODS THEORY LEGAL SYSTEM BILATERAL TRADE VERTICAL SPECIALIZATION INVESTMENT COMPARATIVE ADVANTAGE PREFERENTIAL TRADE TARIFF WORLD TRADE FOREIGN OUTSOURCING INTELLECTUAL PROPERTY FOREIGN COUNTRY BILATERAL TRADE DATA POLICY RESEARCH FIXED COST COUNTRY OF ORIGIN INTERMEDIATE INPUTS TECHNICAL BARRIERS CONSUMER PROTECTION DEVELOPMENT POLICY Recent data show that the institutional content of preferential trade agreements has evolved over time. Although pre-1990s preferential trade agreements mostly focused on tariff liberalization, recent agreements increasingly contain deep provisions in diverse areas, such as intellectual property rights, investment, and standards. At the same time, there has been a remarkable increase in the internationalization of production through foreign direct investment and outsourcing. This paper employs the Antràs and Helpman (2008) model of contractual frictions and global sourcing to study how deep trade agreements affect the international organization of production. The paper constructs new measures of the depth of preferential trade agreements and of vertical foreign direct investment to test the theory. Consistent with the model, the analysis finds evidence that the depth of trade agreements is correlated with vertical foreign direct investment, and that this is driven by the provisions that improve the contractibility of inputs provided by suppliers, such as regulatory provisions. Because this implication of the model is specific to the so-called “property rights” theory of the multinational firm, the findings provide empirical support to this approach vis-à-vis alternative theories of firm boundaries. 2015-11-05T19:49:31Z 2015-11-05T19:49:31Z 2015-10 Working Paper http://documents.worldbank.org/curated/en/2015/10/25225132/deep-trade-agreements-vertical-fdi-devil-details http://hdl.handle.net/10986/22885 English en_US Policy Research Working Paper;No. 7464 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
TARIFFS MULTILATERAL TRADE WORLD TRADE ORGANIZATION INTERNATIONAL ECONOMIC LAW PRODUCTION TRADE EFFECTS FOREIGN DIRECT INVESTMENTS MULTINATIONAL CORPORATIONS TRADE STRUCTURE DISPUTE SETTLEMENT TRADE RULES EXPECTATIONS PROPERTY RIGHTS GDP PER CAPITA EXPORTS DOMESTIC MARKET PARENT FIRM POLITICAL ECONOMY INCENTIVES INTELLECTUAL PROPERTY RIGHTS ECONOMIC POLICY FREE TRADE AGREEMENTS VARIABLES PREFERENTIAL MARKET ACCESS INPUTS OWNERSHIP DECISIONS DUMPING TREATIES MARKET ACCESS FREE TRADE INTERNATIONAL BANK PROTECTIONISM INTERNATIONAL CONTRACTS FOREIGN INVESTMENTS BORDER MEASURES TRADE AGREEMENTS FINAL GOODS PRODUCTION PROCESS CHOICE GROSS EXPORTS PREFERENTIAL TRADE AGREEMENTS LEGAL SYSTEMS FOREIGN PRODUCTION TARIFF DATA EXOGENOUS SHOCKS GLOBAL ECONOMY ORGANIZATIONAL FORM MULTINATIONAL FIRM FOREIGN SUPPLIERS REDUCTION IN TARIFFS REGIONAL TRADE AVERAGE TARIFFS FIXED COSTS CUSTOMS SPECIALIZATION ECONOMETRICS PRODUCTIVITY FINANCIAL INSTITUTIONS CRITERIA WTO FOREIGN ASSETS ACCESS COUNTERVAILING MEASURES PROTECTION OF INTELLECTUAL PROPERTY RIGHTS TRADE POLICY EXPORT TAXES TRADE AGREEMENT RULE OF LAW ECONOMIC RESEARCH TAXES MULTILATERAL AGREEMENTS INTERNATIONAL PRODUCTION INTERNATIONAL TRADE REGIONALISM INTERNATIONAL INVESTMENT COMPETITION POLICY WAGE INEQUALITY VALUE COMPETITIVENESS FOREIGN DIRECT INVESTMENT EUROPEAN UNION PATENTS MULTILATERAL RULES INVESTMENT TREATIES INTERMEDIATE” GOODS MEASUREMENT INTERNATIONAL AGREEMENTS ECONOMIC LAW TRADE DIVERSION MULTINATIONAL FIRMS PROFITABILITY LABOR STANDARDS TRADE DATA TRADE MUTUAL RECOGNITION GDP GOODS THEORY LEGAL SYSTEM BILATERAL TRADE VERTICAL SPECIALIZATION INVESTMENT COMPARATIVE ADVANTAGE PREFERENTIAL TRADE TARIFF WORLD TRADE FOREIGN OUTSOURCING INTELLECTUAL PROPERTY FOREIGN COUNTRY BILATERAL TRADE DATA POLICY RESEARCH FIXED COST COUNTRY OF ORIGIN INTERMEDIATE INPUTS TECHNICAL BARRIERS CONSUMER PROTECTION DEVELOPMENT POLICY |
| spellingShingle |
TARIFFS MULTILATERAL TRADE WORLD TRADE ORGANIZATION INTERNATIONAL ECONOMIC LAW PRODUCTION TRADE EFFECTS FOREIGN DIRECT INVESTMENTS MULTINATIONAL CORPORATIONS TRADE STRUCTURE DISPUTE SETTLEMENT TRADE RULES EXPECTATIONS PROPERTY RIGHTS GDP PER CAPITA EXPORTS DOMESTIC MARKET PARENT FIRM POLITICAL ECONOMY INCENTIVES INTELLECTUAL PROPERTY RIGHTS ECONOMIC POLICY FREE TRADE AGREEMENTS VARIABLES PREFERENTIAL MARKET ACCESS INPUTS OWNERSHIP DECISIONS DUMPING TREATIES MARKET ACCESS FREE TRADE INTERNATIONAL BANK PROTECTIONISM INTERNATIONAL CONTRACTS FOREIGN INVESTMENTS BORDER MEASURES TRADE AGREEMENTS FINAL GOODS PRODUCTION PROCESS CHOICE GROSS EXPORTS PREFERENTIAL TRADE AGREEMENTS LEGAL SYSTEMS FOREIGN PRODUCTION TARIFF DATA EXOGENOUS SHOCKS GLOBAL ECONOMY ORGANIZATIONAL FORM MULTINATIONAL FIRM FOREIGN SUPPLIERS REDUCTION IN TARIFFS REGIONAL TRADE AVERAGE TARIFFS FIXED COSTS CUSTOMS SPECIALIZATION ECONOMETRICS PRODUCTIVITY FINANCIAL INSTITUTIONS CRITERIA WTO FOREIGN ASSETS ACCESS COUNTERVAILING MEASURES PROTECTION OF INTELLECTUAL PROPERTY RIGHTS TRADE POLICY EXPORT TAXES TRADE AGREEMENT RULE OF LAW ECONOMIC RESEARCH TAXES MULTILATERAL AGREEMENTS INTERNATIONAL PRODUCTION INTERNATIONAL TRADE REGIONALISM INTERNATIONAL INVESTMENT COMPETITION POLICY WAGE INEQUALITY VALUE COMPETITIVENESS FOREIGN DIRECT INVESTMENT EUROPEAN UNION PATENTS MULTILATERAL RULES INVESTMENT TREATIES INTERMEDIATE” GOODS MEASUREMENT INTERNATIONAL AGREEMENTS ECONOMIC LAW TRADE DIVERSION MULTINATIONAL FIRMS PROFITABILITY LABOR STANDARDS TRADE DATA TRADE MUTUAL RECOGNITION GDP GOODS THEORY LEGAL SYSTEM BILATERAL TRADE VERTICAL SPECIALIZATION INVESTMENT COMPARATIVE ADVANTAGE PREFERENTIAL TRADE TARIFF WORLD TRADE FOREIGN OUTSOURCING INTELLECTUAL PROPERTY FOREIGN COUNTRY BILATERAL TRADE DATA POLICY RESEARCH FIXED COST COUNTRY OF ORIGIN INTERMEDIATE INPUTS TECHNICAL BARRIERS CONSUMER PROTECTION DEVELOPMENT POLICY Osnago, Alberto Rocha, Nadia Ruta, Michele Deep Trade Agreements and Vertical FDI : The Devil Is in the Details |
| relation |
Policy Research Working Paper;No. 7464 |
| description |
Recent data show that the institutional
content of preferential trade agreements has evolved over
time. Although pre-1990s preferential trade agreements
mostly focused on tariff liberalization, recent agreements
increasingly contain deep provisions in diverse areas, such
as intellectual property rights, investment, and standards.
At the same time, there has been a remarkable increase in
the internationalization of production through foreign
direct investment and outsourcing. This paper employs the
Antràs and Helpman (2008) model of contractual frictions and
global sourcing to study how deep trade agreements affect
the international organization of production. The paper
constructs new measures of the depth of preferential trade
agreements and of vertical foreign direct investment to test
the theory. Consistent with the model, the analysis finds
evidence that the depth of trade agreements is correlated
with vertical foreign direct investment, and that this is
driven by the provisions that improve the contractibility of
inputs provided by suppliers, such as regulatory provisions.
Because this implication of the model is specific to the
so-called “property rights” theory of the multinational
firm, the findings provide empirical support to this
approach vis-à-vis alternative theories of firm boundaries. |
| format |
Working Paper |
| author |
Osnago, Alberto Rocha, Nadia Ruta, Michele |
| author_facet |
Osnago, Alberto Rocha, Nadia Ruta, Michele |
| author_sort |
Osnago, Alberto |
| title |
Deep Trade Agreements and Vertical FDI : The Devil Is in the Details |
| title_short |
Deep Trade Agreements and Vertical FDI : The Devil Is in the Details |
| title_full |
Deep Trade Agreements and Vertical FDI : The Devil Is in the Details |
| title_fullStr |
Deep Trade Agreements and Vertical FDI : The Devil Is in the Details |
| title_full_unstemmed |
Deep Trade Agreements and Vertical FDI : The Devil Is in the Details |
| title_sort |
deep trade agreements and vertical fdi : the devil is in the details |
| publisher |
World Bank, Washington, DC |
| publishDate |
2015 |
| url |
http://documents.worldbank.org/curated/en/2015/10/25225132/deep-trade-agreements-vertical-fdi-devil-details http://hdl.handle.net/10986/22885 |
| _version_ |
1764452324013506560 |