The Asymmetric Effects of Deep Preferential Trade Agreements on Bilateral GVC Participation Levels

Abstract

Although deepening of preferential trade agreements (PTAs) can promote the global value chain (GVC) participation of member countries, we argue that this effect is asymmetric for countries, which are at different levels of economic development. Specifically, deepening of PTAs has a stronger positive impact on GVC participation level of developing member countries than that of developed member countries. Furthermore, compared to the commodity provisions of PTAs, deepening of the factor provisions is more likely to generate a significant asymmetric effect. Empirical analysis using panel data, which covers 43 countries (including some emerging economies) over the 2000–2014 period, supports our predictions. Our findings are also confirmed by a series of robustness tests including the consideration for potential endogeneity issue.