Exempted Sectors in Free Trade Agreements - TDPE

Moynihan Institute of Global Affairs

Trade, Development and Political Economy

Rishi Sharma, Colgate University

Authors: Alan Deardorff (University of Michigan) and Rishi Sharma

Almost all participants in free trade agreements (FTAs) exclude at least a few products or sectors from complete tariff removal on the exports of their FTA partners. The positive tariffs that remain within an FTA are often the highest tariffs that the countries apply on an MFN basis. It seems plausible that such exclusions may be chosen because the domestic producers of these products are viewed as especially vulnerable to competition from imports from the partner country. In brief, they are especially “sensitive sectors.” The authors develop this idea theoretically and then test it empirically on data from 37 countries in 240 importer-exporter pairs within FTAs.

Rishi Sharma is Assistant Professor of Economics at Colgate University. His areas of specialization are international trade and public finance. He holds a PhD in Economics from the University of Michigan.

For more information, contact Devashish Mitra, dmitra@syr.edu