The Depth Of FTA Integration And GVCs Position

As an effective tool of trade policy,the depth of integration of Free Trade Agreements(FTAs)can quantify the trade policy,and the position of a country in the Global Value Chain(GVCs)can evaluate its international division status.The previous studies show that deep agreements promote global production network trade.Whether do deep agreements affect a member's position in Global Value Chains?To answer this question,this study empirically testifies the above supposition using FTAs signed by 38 countries for the period 1995-2009,by exploiting a new database on the content of FTAs to construct measures of depth.And based on the World Input-Output Database database,applyingt "GVCs Position Index" proposed by Koopman et al.(2010),we measure the GVCs Position.We examine the impact of deep integration on GVCs position after controlling for FDI,innovation capability,institution quality,human and other variables,the estimation results reveal that deep agreements have significantly positive effects on GVC position.These results are still robust when controlling for endogeneity.In consideration of the key explanatory variables lagged one period,the depth of integration of FTA still significantly enhance the status of the GVCs position of a country,the estimated coefficients of the latter and significant level are improved to different degrees.In other words,the depth of integration of FTA will play a more and more important role in promoting the GVCs position of a country as time goes on.Furthermore,by constructing the intermediary effect model we find that there is a mechanism of action bet,ween the two in which institutional quality is an intermediary variable.We found that "WTO+" provisions and "WTO-X"provisions could promote upgrading in GVCs,and "WTO-X" provisions have greater effects;the depth of integration of agreements have significantly positive impacts on both OECD countries' and Non-OECD countries' GVC position,and the effect of Non-OECD countries is larger than that of OECD countries;the depth of integration of agreements have significantly positive impacts on both manufacture' and service'GVC position,and the effect of service is larger than that of manufacture.This study has derived policy recommendations for China as the second largest economy at lower value-added manufacturing tasks.It is suggested that Chinese government should include more provisions in FTA especially "WTO-X" provisions for upgrading in GVCs through institutional advantage instead of factor advantage,and strive to improve GVCs position through coordinating trade policies which may be necessary for realizing trade gains.