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Do North-South FTAs diversify the exports of developing countries?

Monday October 4, 2021, at 12:00
Online and Face-to-face. Room TBC*
Research seminar

Antonio Postigo (London School of Economics and Political Science)

Developing countries seek bilateral free trade agreements (FTAs) with developed economies to strengthen political and/or economic relations. But to what extent do developing country exporters use North-South FTAs? Who uses them? Do North-South FTAs diversify the export patterns of developing countries? The study analyzes the determinants shaping the utilization of North-South FTAs in the contexts of their political economy and Generalized System of Preferences (GSP) schemes that developed economies unilaterally grant to exports from developing countries. It is postulated that most of the goods that developed economies liberalize through GSP will be also liberalized from early on in North-South FTAs; however, since FTA concessions are legally binding, goods that are excluded or only partially liberalized in GSP will be also excluded or protected in FTAs. As GSP schemes are subject to unilateral restriction/elimination by the developed country, exporters using GSP tariffs will lobby for the non-removable liberalization of their exports through an FTA and subsequently will have a high FTA utilization. These scenarios result in North-South FTAs being used to a great extent to export goods covered by the GSP and exported through GSP, thus consolidating pre-FTA trade patterns. These arguments were tested by analyzing disaggregated and rarely accessible data on Thai and Malaysian exports through the Japanese GSP and their bilateral FTAs with Japan, as well as interviews with key actors involved in the policymaking of these FTAs. Most of the sectors in Thailand and Malaysia that benefited from GSP lobbied for FTA liberalization with Japan. Goods previously exported through GSP account for most of the FTA utilization, and the previous use of GSP preferences has a higher predictive value of subsequent FTA utilization than FTA tariff savings.

Antonio Postigo holds a PhD from the London School of Economics. His main area of research is the comparative and international political economy of trade and economic integration, with a focus on East and Southeast Asia. He has lectured at universities in the United States, Europe, and Asia and has worked for the United Nations, The World Bank, and several think tanks.

*The format will be online and hybrid (the seminar will run simultaneously face to face and online to allow participants to choose the modality that best suits their needs).