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Impact of Trade Agreements on Barriers in the Petri-Plummer-Zhai Model

Learn how trade agreements influence trade barriers in the Petri-Plummer-Zhai model through flow charts depicting tariff barriers, non-tariff measures, and investment barriers. Understand the calculations for tariff preference utilization, NTBs, FDI gaps, and reduction of barriers.

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Impact of Trade Agreements on Barriers in the Petri-Plummer-Zhai Model

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  1. How trade agreements affect trade barriers in the Petri-Plummer-Zhai model: Flow charts for tariffs, NTBs, and FDI barriersNovember 2015

  2. Note: the following charts show how the barriers for a single agreement are calculated. The barriers that apply to a trade flow (say, exports from Viet Nam to Japan) are selected as the lowest among the barriers calculated under the several trade agreements that cover the trade flow.

  3. Tariff Barriers Measured tariff Preference utilization rate Agreement per capita income 0.25~0.85 Utilized tariff Agreement-specific tariff reduction Agreement size (GDP) 0.0~1.0 Reduction ofutilized tariff KEY: 0.1~0.4 ROO cost increase rate Input Calculated value New tariff Iceberg cost increase

  4. Non-Tariff Measures Measured NTMs 0.75/0.25 Estimated NTBs Legitimate NTMs goods: 0.75/0.25 services: .50/.50 Actionable barriers Unchangeable barriers Agreement provision score 0.0 ~1.0 Barrier reduction MFN barrier reduction Subsequent effects as in member countries 0.20 0.50/0.50 Rent reduction Cost reduction 0.50/0.50 KEY: Importing country rent reduction Exporting country rent reduction Input Tariff-like effect + domestic transfer Tariff-like effect + transfer abroad Calculated value Iceberg cost reduction

  5. Investment Barriers Measured FDI gap 0.75/0.25 Barrier-related gap Legitimate gap 0.75/0.25 Actionable gap Unchangeable gap Agreement provision score 0.0 ~1.0 Same effects that follow gap reduction in member countries Gap reduction MFN gap reduction 0.20 0.50/0.50 Investment rent reduction Investment cost reduction KEY: 0.50/0.50 0.50/0.50 Input Host benefit Investor benefit Host benefit Investor benefit Calculated value

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