Choosing Between Multiple Preferential Tariff Schemes: Evidence from Japan's imports

         
Author Name HAYAKAWA Kazunobu (Institute of Developing Economies, JETRO) / URATA Shujiro (Faculty Fellow, RIETI) / YOSHIMI Taiyo (Nanzan University)
Creation Date/NO. January 2017 17-E-002
Research Project A Study of Free Trade Agreements
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Abstract

Mega regional trade agreements (RTAs), such as the Trans-Pacific Partnership, are likely to overlap with existing RTA networks. When RTA networks overlap, firms are required to choose from multiple RTA schemes when they trade. This study investigates how RTA tariff rates affect the use of both own and other tariff schemes when multiple RTA schemes are available. We first theoretically explore such choice and derive some propositions. Then, we empirically test those propositions for Japan's imports because Japan already has not only bilateral but also multilateral RTAs with some Association of Southeast Asian Nations (ASEAN) countries. The key finding is that the utilization rate of an RTA scheme is higher when its preferential rates are lower compared to the rates in the other RTAs.