The Trade Effect of Non-tariff Measures in a Comprehensive Trade Agreement

Abstract

The aim of this study is to quantify the trade effects of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which is considered to be a comprehensive trade agreement. To this end, we estimate the gravity equation for worldwide trade and introduce applied tariffs into this equation to differentiate between the trade effects of tariff reduction and non-tariff measure (NTM) changes. Our gravity equation results indicate that the trade effect of NTM changes under the CPTPP is insignificant on average and negative for most products. We also estimate the gravity equation for foreign direct investment (FDI) and find some evidence that the CPTPP increased FDI by a statistically significant amount. Thus, the NTM changes in the CPTPP may increase FDI, rather than trade, among member countries.