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

October 1, 2015

Recent data show that the institutional content of preferential trade agreements has evolved over time. Although pre-1990s preferential trade agreements mostly focused on tariff liberalization, recent agreements increasingly contain deep provisions in diverse areas, such as intellectual property rights, investment, and standards. At the same time, there has been a remarkable increase in the internationalization of production through foreign direct investment and outsourcing. This paper employs the Antràs and Helpman (2008) model of contractual frictions and global sourcing to study how deep trade agreements affect the international organization of production.

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Topics: FOREIGN DIRECT INVESTMENT (FDI) TARIFF LIBERALIZATION PREFERENTIAL TRADE AGREEMENT (PTA) TRADE-RELATED ASPECTS OF INTELLECTUAL PROPERTY RIGHTS (TRIPS)

Authors: ALBERTO OSNAGO NADIA ROCHA MICHELE RUTA

Publishing Institution: WORLD BANK GROUP

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