What is it about?
We use the synthetic control method to assess the impact of the FTA on the GDP per capita of the US partner. We find heterogeneous effects. The impact seems negative for countries that rely heavily on trade with the US, while the opposite holds for countries with more diversified trade. For many other countries, the effect is negligible.
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Why is it important?
The results cast doubt on the economic benefits of bilateral agreements, as these may include rules that hinder spillovers or the adoption of new technologies to the partner of the US. In any case, the result supports Rodrik's suggestion that institutions are critical for trade openness to be beneficial.
Perspectives
The synthetic control method is a promising technique to assess causality in policymaking, as it allows for constructing a valid counterfactual. This kind of analysis may guide trade policy by providing insights into the possible effects on the country's economic development.
Esteban Colla-De-Robertis
Universidad Panamericana
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This page is a summary of: The effect of a free trade agreement with the United States on member countries' per capita GDP: A synthetic control analysis, Regional Science Policy & Practice, April 2021, Wiley,
DOI: 10.1111/rsp3.12402.
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