WTO Working Paper ERSD-2015-01  
Date: 20 February 2015 
World Trade Organization 
Economic Research and Statistics Division 
The Layers of the IT Agreement's Trade Impact 
Christian Henn
and
Arevik Gnutzmann-Mkrtchyan 
Manuscript date: February 2015 
Disclaimer: This is a working paper, and hence it represents research in progress. The opinions 
expressed in this paper are those of its author. They are not intended to represent the positions or 
opinions of the WTO or its members and are without prejudice to members' rights and obligations 
under the WTO. Any errors are attributable to the author. 
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TheLayersoftheITAgreement’sTradeImpact
ChristianHenn
a
,ArevikGnutzmann-Mkrtchyan
b
a
WorldTradeOrganization
b
EuropeanUniversityInstituteandUniversityofHannover
Abstract
TheWTO’splurilateralInformationTechnologyAgreement(ITA)reducedtaristozeroonmanyIT
products. Thispaperpresentsacomprehensivestudyofitstradeimpactsbyincorporatingrecentin-
sightsfromboththeglobalvaluechain(GVC)andtimeintradeliteratures. Insertingtarisdirectly
into the gravity equation breaks theITAsimpact down into four layers. . Import t demand elasticities
arefoundtobenon-linear:Tarireduction(layer1)hasrelativelysmallimpacts,whilecompletetari
elimination(layer2)hashighimpacts,especiallyforintermediategoods. Beyondthat,ITAaccession
haspositivenon-tari eectsonbothimports(layer3)andexports(layer4). . Thesecommitmentef-
fects suggest that highertradepolicycertainty aects investmentandsourcingdecisionsinfavourof
signatories: TheirITAexportsperformedbetter r relativetootherICTandmachineryexports,unlike
non-members. But\passivesignatories"{whichjoinedmainlyasaby-productofalargerpolicyob-
jective{ reaped the most benets. . Featuringa a smaller ITA sector upon accession, their nalgood
exportsincreasedalsoinabsolutetermsduetodownstreamGVCintegration. However,suchimpacts
arestronglyheterogeneouswithrespecttocountries’geographicalremoteness,educationlevels,business
environmentandinstitutions. Chinastandsoutwithespeciallystrongpost-accessionexportincreases,
alsoextendingtointermediategoods.
1
JELCategories: F13,F14,L63.
Keywords: taris,tradepolicycertainty,valuechains,fragmentation,WTOInformationTechnology
Agreement,gravityequation,product-leveltrade,non-linearity.
Emailaddresses: chenn@imf.org(ChristianHenn),arevik.gnutzmann@mkrtchyan.info(Arevik
Gnutzmann-Mkrtchyan)
1
This paper does notrepresent thepositionor opinionsoftheWTO oritsMembers,apart fromtheauthors. . Any
remainingerrorsareresponsibilityoftheauthors. Thispaper r requiredsubstantivepreparatoryworktoaddress issues
relatedto product t coverageandmembershipof the ITA that was possible due toassistance ofWTOdelegations and
secretariat sta, inparticularFlorianEberth,Rainer LanzandRoySantana. . Theauthorsthankseminar r participants
at the e EuropeanTrade Study Group’s 2014 Annual Conference inCopenhagen, the Geneva Trade andDevelopment
Workshop,theNovember2014JointIMF-WorldBank-WTOTradeConferenceandattheUniversityofGoettingen.They
alsothankMarcBacchetta,CosimoBeverelli,TheoS.Eicher,HinnerkGnutzmann,AlbertoOsnago,ChrisPapageorgiou,
RobertaPiermartini,XiaobingTang,RobertTeh,XiaozhunYiandYotoYotovforsuggestionsonthisresearch.Theyare
gratefultoPauloGuimaraesforadviceonestimationwithseveralhigh-dimensionalxedeectsandTimothySturgeonfor
kindlysharinghisdataonclassicationsofgoodsintointermediateandnal. ArevikGnutzmann-Mkrtchyangratefully
acknowledgessupportreceivedfromtheITTCSupportProgrammeforDoctoralStudiesattheWTO.
1
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1. Introduction
Among the WTO’s plurilateralagreements,theInformation Technology Agreement(ITA)stands
outasbeingthemostwide{ranging,reducingtozerotarisonawiderangeofinformationtechnology
products. This s makes it t the e paramount case for study y of f the e eects s that multilateralzero-for-zero
agreements,whichcompletelyeliminatetaribarriers,mayhaveontrade ows. Moreover,production
ofgoodscoveredbytheagreement(\ITAgoods")ischaracterizedby highverticalintegration. . Their
analysiscanthereforehelpassessthevalidityofYi(2003)’stheoreticalmodel,whichimpliesthateects
oftradepolicychangesareespeciallyhighinverticallyintegratedsectors.
PolicyrelevanceoftheITA’stradeimpactisheightenedfurtherforthefollowingtworeasons.First,
an ITA II I agreement is currently being debated. . It t could d clarify and d further amplify y the product
coverageoftheoriginalITAagreement,adaptittothecurrenttechnologicalenvironmentandpossibly
extendcoveragetonon-tarimeasures.Second,tarieliminationagreementsforothersectorsareoften
oatedasproposals,mainlybydevelopedcountries,withtheaimofbringingtheWTODohaRoundto
conclusion.
Yet,theliteratureexaminingthetradeimpactoftheITAissurprisinglyscarce. Toourknowledge,
Mann and Liu u (2009), , with h Bora and Liu (2010) building further on their r work, , provide e the only
econometricanalysesoftradeimpactsoftheITA.Thesestudiesdonottakeadvantageofproduct-level
information,relyingonaggregate data instead, , which can bias s results ifbilateraltrade relationships
areheterogeneousacrossproducts. Furthermore,they y quantifyonlyoneaggregateimpactoftheITA
andonimportsonly. Theyndthat t ITAsignatoriesimportonaverage14percent moreITAgoods
afteraccessionthannon-membersoftheWTO.Analyzingdataupto2003,thesestudiesmainlycover
foundingmembersoftheITA{whichcameintoeectin1997{butnotmanyimportantmorerecent
signatories,includingChina.
JosephandParayil(2006)alsoanalyseearlyITAtradeuntil2003andhypothesizethatthesemore
recentsignatories,orpassiveadoptersastheycallthem,wouldreaplowerbenetsfromtheagreement,
giventhattheycouldnotbringtheirownintereststobearinthenegotiations.
2
Butthishypothesishas
notbeentested. AndersonandMohs(2010),benetingfrommoreextentedtimecoverage,incontrast
arguethattheITAhasfosteredtherapidincreasesinobservedindevelopingcountries’exports. While
limitingthemselvestoadescriptivereviewoftrendsinITAproducttrade,theauthorsshiftthefocus
ofthediscussion,incorporatingasupplychainperspectiveandconsequentlinkagesbetweenimportand
exportactivities:Theyarguethattarireductionsledtolowerpricesforintermediateinputs,whichin
turnunderpinnedmanydevelopingcountries’competitivenessandconsequentlyexportgrowth.
3
Feenstra(2008)examines,specicallyforITproducts,thetaritoimportpricepass-through,i.e.
rsthalfofthiscausalitychain.HendsthattarireductionsonproductscoveredbytheITAhavea
highlymagniedeect{ofuptoafactorof22(!){ontheirimportprices.Hearguesthattheveryhigh
magnitudeofthiseectmayresultbecauseITAmembers’tariswerealreadyinthelowsingledigits
beforeaccession,therebythetotalimpactismoremoderate.Ourresultsmeanwhileindicatedthatthese
highestimatesareactuallyaresultofnon-linearityintheimpactoftarichanges.
This paper r provides the rst comprehensive analysis s ofthe e ITA’s impact on trade e  ows, taking
seriously initsestimationstrategythe abovepoints,amongst others. . First,againstthebackdropof
supplychainintegration,ITAaccessioncanleadtosimultaneousimpactsonbothimportsandexports.
2
WhileJosephandParayil(2006)acknowledgethatsomedevelopingcountrieshaveoutperformedwithrespecttotrade
growthinproductscoveredbytheITA,theyarguethatthisoutperformancehaspredatedandisunrelatedtotheITA.
3
Anexpandingliterature onglobalvaluechains alsodevelopthesearguments beyondtheITsector(e.g. . Gawande
etal.(2011),MilbergandWinkler(2010)).
2
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Second, impacts s may y vary depending g on how w a a country y joined the e ITA and d the initial l state e of its
ITAgoodsproducingsector;moreonthisbelow. Third,inaverticallyfragmentatedsector,impacts
canalsobeexpectedtodieracrossintermediateandnalgoods,whichwedistinguishbasedonthe
classicationofSturgeonandMemedovic(2010).Fourth,toderiveunbiasedestimatesoftheseimpacts,
proper controls for r multilateral l resistance are e needed, , which is s made possible e by y introduction of f a
non-ITAcontrolsector. Finally,impactsmay y be non-linearandconsistofdierentlayers. . Byusing
product-leveldata,whichallowsustodirectlyintegratetarisintothegravitymodel,wecandistinguish
threeseparateeectsontheimportside. Withanadditionaleectonthesideofexports,weidentify
fourlayersintotal.
Ontheimport side,our frameworkrst distinguishes betweentari reduction(layer1)andtari
eliminationeects(layer2).Thelatterallowforanadditionalimpactofsettingthetaritozero,because
thiseliminatescostlyadministrativeburdensandtimedelaysincrossingtheborder,whosedetrimental
impacts on imports have beenfound tobe substantialby an emerging time intradeliterature(e.g.
Djankovetal.(2010),HummelsandSchaur(2013),Martincusetal.(2013)). Wendtarireduction
eects,i.e. importdemandelasticitieswithrespecttotaris,inthe-0.3to-0.4range,suggestingthat
eachpercentagepointreductionintaris raisesITAimportvalue by0.3to0.4percent. . Eliminating
taris completely has amuchhigherimpact of10-13percent forITAgoods, , andas s thevalue chain
literaturesuggests,is higherforintermediategoods. . ProvidingintuitionforFeenstra(2008)’sresults,
wendthisnon-linearityparticularlypronouncedforITAgoods,thoughitalsoexistsforourcontrol
sectorsofotherICTandmachinerygoods. Thesersttwolayerscouldalsoberealizedbyacountry
unilaterallyeliminatingtariswithoutjoiningtheITA.
The 3rd layer on the import side, meanwhile, quanties whether the e ITA has s a a \non-tari" or
\commitment eect" on imports { going beyond eects of tari reduction and elimination. . As s the
ITAalsoreducesparticipants’WTOboundtarirateforcoveredproductstozero,thisliberalization
undertakenwithintheITAishardertoreverse,therebyincreasingtradepolicycertainty.Moreover,any
tariincreaseswouldbesubjecttodisciplinatoryactionenforcedthroughtheWTOdisputesettlement
mechanism. This s could d in uence e location n decisions s of f multinational IT rms s in favor of f signatory
countries and thus should increase their imports,particularly y of f intermediate products s (Antras and
Helpman (2008), Blyde and Martincus (2013), Osnago et al.(2008)). . Also,exporters s may be more
inclinedtowardinvestmentsinadvertisingordistributionsystemsinsignatorycountries.Finally,there
isthepossibilitythatmembershipinaninternationalagreementsuchastheITAmayovertimeencourage
convergenceinproductstandards,whichcouldspurtrade.
4
WendthatsuchanITAcommitmenteectonimportsexists,havingincreasedimportsbyaround
8-10percentmainlyamongitsfoundingmembers,asthesecountriesoutsourcedITAgoodproduction.
Furthermore,commitmenteectscreatedjustbyjointWTOmembershipareveryimportant,boosting
ITAimports byaround40percentinabsoluteterms. . We,moreover,ndthatWTO O accessionhasa
largerimpactonmembers’intermediategoodsimportsofITAproductsthanotherICTormachinery
products.
The 4th layer is the e commitment t eect on exports. . As s the e export-side analogue e to o layer 3, it
formalizesthatITAmembershipmayencouragerelocationofmultinationalITrmstowardsignatory
countries,giventhatexports rely heavily onimports,particularly indownstreamproductionstages.
5
4
Portugal-Perezetal.(2010)analyzetheimpactoftheITAonEU15importsupto2007andfocusonnon{taricosts.
TheauthorsndapositivetradeimpactwhenEUstandardsarealignedwithinternationalnorms. Theirresultsthereby
indirectlysuggestthattheITAmayhavefarther{reachingimpactsifitleadstoharmonisationofstandards.
5
WeacknowledgeanextensiverelatedliteraturewhichhighlightsthatinvestmentinITgoodsmayboostproductivity
morethanotherinvestments (e.g. . Jorgenson(2001), , Colecchia andSchreyer(2002)). . Ifthe e ITA encourages suchin-
3
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Thisinturnshouldincreaseacountry’sITexportstoallothercountriesnomatterwhethertheyare
ITAmembersornot.
6
Wendthatthisisindeedthecase,butwitheectsvaryingacrossdierenttypesofITAaccession
countries. BuildingonWorldTradeOrganization(2012){whichprovidesacomprehensiveanalysisof
the formation,membership andcoverageoverviewoftheITA{ we canidentify aseries of countries
(\passive"signatories)whichjoinedtheITAonly after1997andmainly asaprerequisiteforalarger
policyobjective. Suchalargerobjectivecouldbethreefold:accessiontotheWTO,theEUortoafree
tradeagreementwiththeUnitedStates. WendthatpassivesignatorieshadmuchsmallerITAgood
exportsectorsuponaccessionthanothersignatories,andtherebyperhapsfeaturedalesspowerfulIT
sectorlobbywhichmayexplaintheirarguablylowermotivationtojoin.
Ourresultsshowthatpassive signatorieswere the onlyonestogainfromITAaccessionthrough
higherexportsinabsoluteterms. Thispost-accessionincreaseamountedto8percent(and30percent
relativetocontrolsectorexports).Togetherwithstrongincreasesinintermediateimports,thissuggests
thatthesecountries{manyofthemdevelopingoremerging{integratedinthedownstreamstagesof
production.Thisndingisinlinewiththevaluechainliteraturewhichhighlightsthatdownstreamtasks
inassemblyandbasicmanufacturingareeasiest tomasterandthereby providenaturalentry points.
Chinaisfoundtodierfromotherpassivesignatories: itsexportsincreasedinbothintermediateand
nalgoodsandmorestrongly,demonstratingachievementofadiversiedexportstructureinthesector
postITAaccession.
Finally,wealsohighlightlargecountry-specicheterogeneityregardingtheextenttowhichcountries
havebeen able to benet from ITAmembership. . We e nd that onaverage those countries withlow
education, unfavorable business environments, , weak k institutions, or a remote geographical location
struggledtoreapexportbenetsfromtheITA.
Theremainderofthepaperisstructuredasfollows.Section2providesabriefoverviewoftheITA
andpreliminarygraphicalanalyses oftheITA’simpact on exportsforpassive andothersignatories.
Section3describesourdatasetandSection4presentsourestimationstrategy.Section5presentsresults,
whoserobustnessisexaminedinSection6. Section7exploresheterogeneityofITAbenetsdepending
oncountrydeterminants. Section8concludes.
2. TheITAandarstglance e atitsimpact
TheITAisaplurilateralagreementundertheWTO.Itwasnegotiatedamong34countriesuntil1996.
NinemorecountriessignedupbytheMarch1997deadline,whichatthetimetooktheagreement’strade
coverageabovethe\criticalmass"thresholdofleast90percentofworldITtrade,andtheagreement
cameintoforce.
7
Membershipincreasedto74countriesby2012,theendofoursampleperiod,and78
by2014.
TheITAfocussesexclusivelyontarieliminationforcertainIT-relatedproducts;itdoesnotinclude
provisionsonnon-tariissues.Itcoversabout60percentoftradeinITgoodsbyitemizing190products
in a rigid positive listing. . These e 190 products s correspond d to 154 HS1996 subheadings, i.e. . 6-digit
productcodes,butmany subheadingsare only coveredpartially,makingtheITA’s productcoverage
complex(WorldTradeOrganization,2012).Wewillfurtherelaborateinthedatasectionontheresulting
vestmentvialowertarisandresultingproductivityincreasesinturnincreaseexports,thenthismayconstituteanother
channelthroughwhichITAaccessioncancometoaectexports(inITAandothergoods).
6ThehigherincentivetoexporttowardITAmembers,giventheirmoreliberalimportregime,isalreadycapturedby
theeectsontheimportside.
7
Theeconomicintuitionbehindsuchcriticalmassthresholdsistominimizefreeriding.
4
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implicationsforouranalysis.TheITA’spositivelistinghasnotbeenupdatedsinceitsinception,though
there areinitiativesintheWTO{dubbedITAII{toclarify,updateandexpandits coverage,possibly
tonon-tarimeasures. The e positivelistingof the ITA implies thatnewICTproductsgenerally are
not coveredby it,anditposes problems especiallyformultifunctionalgoods. . Thiscomplex x product
coveragehasbeenakeypointofcriticismandhascausedadisputeintheWTO.
8
TheITArequiresmembers toapply agreedtari concessions toallWTOmembers,whether ITA
signatories or r not, , by y adjusting their MFN N applied and d bound d taris. . Founding g members were e to
implementzerotarisby2000,butsomedevelopingcountrieshadlongerimplementationperiods(upto
2005atthelatest).Implementationperiodsforcountriesjoininglater(after1997)havebeendetermined
innegotiationsandthereforevaried,butinmostcasesdidnotsurpassthreeyears.
Amongtheselatesignatories,wedistinguishtwogroups.Manylatesignatoriescanbeconsideredto
havejoinedtheITAmainlyasaby{productofabroaderpolicyobjective.
9
Weidentifythreereasons
behindtheaccessionsofsuchcountries,whichwerefertoas\passivesignatories". First,somecountries
that were acceding to the WTO after 1997 hadthe commitment tojoin the ITA in their accession
protocolasaresultofaccessionnegotiations. Second,allrecentmembersoftheEuropeanUnion(EU)
hadtoadoptthetradepolicyoftheEUuponaccessionorinthepreparatoryprocessandhencejoined
theITA,unlesstheyhadalreadyacceededearlier. Third,theUSwasoneoftheinitiatorsoftheITA
andwasactivelypursuadingpotentialFTApartnersduringnegotiationstojointheITA.Meanwhilewe
willrefertoallITAmembersthatarenotpassivesignatoriesas\activesignatories".Theseincludeall
foundingmembersaswellaslatesignatorieswhoseaccessionwasnotmainlymotivatedbyoneofthese
broaderpolicyobjectives.
Table1belowpresentsthelistsofactiveandpassivesignatoriesaswellasaccessionyearsforallnon-
foundingmembers. Itillustratesthatpassivesignatoriesenteredtheagreementinvariousyears. The
majorityofpassivesignatories,13economiesintotal,becamesignatoriesviaWTOaccession.Another
15countrieswereclassiedaspassivesignatoriesbecausetheirITAaccessionwasrelatedtonegotiating
anFTAwiththeUSorEUaccession.
Taris on ITA products were generally already lowbefore accession for member countries. . This
is particularlytrueforactive signatories,whoseITA producttarisaveraged2.5percent intheyear
beforeaccession. Latersignatorieshadsomewhathighertarisintherespectiveyearbeforeaccession,
averaging3.9percent.
10
However,theyhadgenerallybeenreducingtheirtarisconsiderablyonthese
goodsalreadybeforeaccession(Figure1).
PassiveITAmembers’importanceinworldITAgoodstradehasgrownimmenselyoveroursample
period(Figure2).Thesegainshavecomeattheexpenseofactivesignatories,whicharepredominantly
developed countries. . China,anpassive e ITAsignatory,has become a very dominant player and this
could raiseconcerns that alarge part ofour results couldbedrivenby y China. . Toaccount t for that,
weexaminelaterinallourregressionspecicationstheeects onthewholesampleandonasample
excluding China’s exports. . However,other r passive signatories haverecorded remarkableincreases in
theirworldmarketsharesaswell,albeitfromalowbase.
Notably both for China a and other passive ITA signatories the increase inmarket share is more
impressiveforexportsthanimports.Onthe ipside,theactivesignatorieslostmoreoftheirimportance
inexportsthanimports. Thisillustratesthat,geographicallyspeaking,importdemandforITAgoods
8
SeeDreyerandHindley(2008)forfurtherdetails.
9
Whetherthiswasthecasewasassessedbytheauthors basedon(WorldTradeOrganization,2012,Table2.1)and
interviewswithWTOdelegationsandsecretariatsta.
10
Theseaveragetariguresincludepreferentialtaris.AverageMFNappliedtarisaresomewhathigher,3.8and6.3
percentforinitialandlatesignatories,respectively.
5
Table1:ITAmemberscategorizedbymotivationdrivingtheirITAaccession
\Active" ITAsignatories, including all foundingmembers
1
Australia
Hong Kong, China
NewZealand
Austria
Iceland
Norway
Belgium
India
Philippines
Canada
Indonesia
Poland
Chinese Taipei
2
Ireland
Portugal
CostaRica
Israel
Romania
Czech Republic
Italy
Singapore
Denmark
Japan
Slovak Republic
Egypt (2003)
Korea, Republic of
Spain
El Salvador
Kuwait(2010)
Sweden
Estonia
2
Liechtenstein
Switzerland
EuropeanUnion
Luxembourg
Thailand
Finland
Macao, China
Turkey
France
Malaysia
UnitedArab Emirates(2007)
Germany
Mauritius(1999)
UnitedKingdom
Greece
Netherlands
UnitedStatesofAmerica
\Passive"ITA signatories, whose ITAaccessionwaslikely signicantlymotivatedby...
WTOaccession
EU accession
US FTA
Albania(1999)
3
Bulgaria(2002)
Bahrain, Kingdom of(2003)
China(2003)
Cyprus(2000)
Colombia(2012)
Croatia (1999)
3
Hungary (2004)
DominicanRepublic (2006)
Georgia (1999)
3
Malta (2004)
Guatemala(2005)
Jordan(1999)
3
Slovenia(2000)
Honduras(2005)
Kyrgyz Republic(1999)
Morocco(2003)
Latvia(1999)
Nicaragua(2005)
Lithuania (1999)
3
Panama(1998)
Moldova, Republicof(2001)
Peru(2008)
Oman (2000)
SaudiArabia, Kingdom of f (2005)
Ukraine (2008)
VietNam(2006)
3
Sources: Authors’compilation n based onWTO (2012)and information obtainedthroughinterviews of variousWTO Secretariatsta.
1
ITAfoundingmembersjoined in 1997. . Accessionyearforall non-foundingmembersisgiven n in parentheses.
2
AmongITA foundingmembers,Chinese Taipeiand Estoniawere the onlyones which onlyjoined the WTO subsequently (in 2002and 1999,respectively). . They
had ITA membership asarequirementintheirWTO accession protocols,we classify them asactive signatoriesbecause they were foundingmembersandacceeded
before their r WTO O accession.
3
These countriesalready joined the ITA duringtheirWTO accession process in the calendaryear r before e WTO accession (only Lithuania acceeded the WTO two
calendaryearslater,in2001).
6
Figure1:AverageappliedimporttarisonITAgoodsbytypeofaccession(percent)
Figure2: WorldmarketsharesinITAproductsbytypeofaccession,1996and2012
7
Figure3: ExportvalueofITAproducts(index,1996=100)
hasbeenrelativelystableovertime,whileoriginofproductschangedsignicantlyinthelastdecades,
arguablydrivenbyinpartbylocationandsourcingdecisionsofmultinationalenterprisesasdescribed
intheGVCliterature.
Thisraisestheinterestinexporttrendsamongthesegroupsovertime.Figure3presentsthenominal
exportvalueofITAproductsbycountrygroupswith1996valuesindexedat100.Exportsofallgroups
haveincreased. ExportsofactiveITAmembersandnon-ITAmembersexportsshowasimilarpattern
ofcomparativelymoderategrowth. PassiveITAsignatoriesinsteadhaveamuchsteeperslope. When
thelowerinitialstartvalueistakenintoaccount,theexpansionoftheirexportscanalmostmatchthat
ofChina,reportedseparatelyinthegure,andactuallyoutstrippedChinauptoitsITAaccessionin
2003. However,Figure3doesnotprovideagoodnotionofhowITAaccessioninparticularmayhave
impactedgrowthinpassivesignatories,becausepassivesignatorieswerenotintheITAyetintheearlier
yearsofthegure.
Toobtainanotionofwhether ITAaccessionmay haveboostedexportsofpassivesignatories,we
thereforelookathowtheirexportshaveevolvedbeforeandafterITAaccession. Toeliminatein uences
ofglobal uctuationsinITAtrade,wenowlookatmarketshares,whichwerescaleto100intheentry
year toallowforsimpleaveragingacrosscountries. . Toretainasucientnumberofcountries s inthe
sample,we focus only onthe 7years before theITAentry year and5yearsafter. . Figure e 4presents
theresults. Twelvepassivesignatoriescanbeobservedduringsucha12-yeartimewindow(\Constant
Country Sample"). . To o check the robustness ofthe ITA exports pattern over time across s larger r set
ofpassivesignatories,welookatallpassivesignatories(\ChangingCountrySample")duringthis12
yearperiod. Forbothsamples,thegureindeedsuggeststhatworldexportmarketsharesofpassive
signatoriesstarttoincreasesubstantiallyaroundthetimeofITAaccession.ThegureincludesChina,
butitisinsensitivetoitsexclusion.
Upon accession, passive signatories had a relatively y smallITA A export sector compared to active
signatories. ITAexport t sectors wereseveraltimeslargerinactivesignatoriesinthe year before ITA
accesion: ITAproduct t exports amounted to only 2.8percentof active signatories’GDP onaverage
(median1.0percent),whileinpassivesignatoriestheywereonly0.4percentofGDPonaverage(median
0.1percent). Figure6intheappendixprovidesthedistributionofITAexportsectorsizes,illustrating
8
Figure4:MarketshareinglobalITAproductexportsof"passivesignatories"(index,accessionyear=100)
thatthevastmajority ofpassivesignatories hadverysmallITAexportsectorsjustbeforeaccession.
ITAexportssurpassed1percentofGDPineveryotheractivesignatory,whilethisisonlythecasefor
oneinsevenofthepassivesignatories.Thesameconclusionsresult,ifweanalyzeITAgoodsimportance
incountriesexportbasketinlieuofGDP(AppendixFigure7).
Finally,weevaluatehowsharesofITAproductsincountries’exportbasketshaveevolvedovertime
(Figure5).Wenotethatfromthemid-1990suntilthedot-combustin2001,theseshareswereexpanding
across allgroups. . Foractivesignatories,thisexpansioncoincidedwiththeyears s justaftertheir ITA
accessionin1997,butgiventhatITexportsexpandedglobally,itmaybehardtoattributethistothe
ITA.Passivesignatories acceededtothe ITAindierentyears,butmost didsoin1999 or the early
2000s(Table1).Wecalculateameanaccessionyearforthisgroupoflate2002. Figure5suggeststhat
thesepassivesignatoriesexperiencedgrowthoftheirITAsectorafteraccession. Duringthemid-2000s,
theshareofITAproductsintheirexportbasketssurged{andstabilizedsubsequentlyatahigherlevel
{whilethoseofothercountries werestagnant. . ThustheincreaseinglobalITAexportmarketshare
ofFigure4wenthandinhandwithanincreasedimportanceofthesectorwithinpassive signatories’
economies.
3. Data
Our dataset matches product-level trade e data in ITA products s to taris, , ITA membership and
commongravityvariables. Thesearediscussedinturn,butrstweelaboratefurtherontheempirical
issuesposedbytheITA’saforementionedcomplexproductcoverage.
TheITAcontainsarigidpositivelistingofcoveredproductswhichreachesacrosscategoriesinthe
6-digitHS1996classicationonwhichtheagreementwassigned:Intotal,itaects154productlinesin
thisclassication,butonly95productlinesarecoveredfully.Therestarecoveredpartially,creatingan
issueforempiricalanalysis,asalsohighlightedbyAndersonandMohs(2010).WethusconsiderasITA
productsinouranalysisallfullycoveredlinesplusanother11lines,whichaccordingtoWorldTrade
Organization(2012)includeahighproportionofITAproducts,foratotalof106lines.
ThisproblemrelatingtotheITA’scoveragebecomesfurtherampliedinlateryearsbytheupdates
tothe HS2002 and HS2007 vintages. . Consequently, , its s coveragehas tobe reassessed ineachofthe
9
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