Deep Trade Agreements and Vertical FDI : The Devil Is in the Details

Osnago, Alberto ; Rocha, Nadia ; Ruta, Michele

World Bank, Washington, DC

关键词: TARIFFS;    MULTILATERAL TRADE;    WORLD TRADE ORGANIZATION;    INTERNATIONAL ECONOMIC LAW;    PRODUCTION;   

DOI  :  10.1596/1813-9450-7464
RP-ID  :  WPS7464

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Recent data show that the institutionalcontent of preferential trade agreements has evolved overtime. Although pre-1990s preferential trade agreementsmostly focused on tariff liberalization, recent agreementsincreasingly contain deep provisions in diverse areas, suchas intellectual property rights, investment, and standards.At the same time, there has been a remarkable increase inthe internationalization of production through foreigndirect investment and outsourcing. This paper employs theAntràs and Helpman (2008) model of contractual frictions andglobal sourcing to study how deep trade agreements affectthe international organization of production. The paperconstructs new measures of the depth of preferential tradeagreements and of vertical foreign direct investment to testthe theory. Consistent with the model, the analysis findsevidence that the depth of trade agreements is correlatedwith vertical foreign direct investment, and that this isdriven by the provisions that improve the contractibility ofinputs provided by suppliers, such as regulatory provisions.Because this implication of the model is specific to theso-called “property rights” theory of the multinationalfirm, the findings provide empirical support to thisapproach vis-à-vis alternative theories of firm boundaries.