Abstract:
This paper provides the first global empirical evidence on the trade effects of losing shared regional trade agreement (RTA) coverage. Moving beyond single RTA exit cases, I study worldwide bilateral trade flows from 1980 to 2016 and estimate the effect of de-coverage using a structural gravity model together with a heterogeneity-robust staggered difference-in-differences design. I find that de-coverage reduces bilateral trade by about 37% on average, a magnitude similar to the gains from RTA formation. A key contrast with the RTA entry literature is its dynamics: while trade gains from RTA formation build up gradually over time, the adjustment to de-coverage is front-loaded. Heterogeneity analysis shows larger losses for dyads with longer prior RTA histories, geographically distant partners, and country pairs with asymmetric income levels. Product-level estimates show declines concentrated in intermediate and consumption goods.
