Several mega-regional trade agreements (RTAs) involving a large number of countries have been under negotiation including the Trans-Pacific Partnership (TPP) Agreement. Although the TPP was axed by new U.S. President Donald Trump, the number of multilateral RTAs, including mega-RTAs, is increasing. The emergence of mega-RTAs is likely to complicate the trading environment, as some countries may be covered by overlapping RTAs. In the March issue of the RIETI Report, we present the column "Designing mega-regional trade agreements" by Kazunobu Hayakawa from the Institute of Developing Economies, RIETI Faculty Fellow and Waseda University Professor Shujiro Urata, and Nanzan University Associate Professor Taiyo Yoshimi.
Hayakawa et. al look at how exporters choose tariff schemes given a choice of multiple RTAs. They found that the utilization rate of RTA schemes depends on the quality of the RTA in terms of the coverage of products for tariff reduction, the extent of tariff reduction, and the extent of ease of complying with rules of origin. Mega-RTAs should be designed to be of the best quality such that the exporters choose to utilize them without consideration of other overlapping RTAs, resulting in the avoidance of the "spaghetti bowl" effect.