Trade Creation, Political Sensitivity and Product Exclusions: The Political Economy of Agriculture Protection in China’s FTAs

The most significant feature of Free Trade Agreement (FTA) is that certain products are excluded from the agreement. Why do some products get more protection in FTAs? Using the highly disaggregated product-level data in agricultural sector of China’s FTAs, we have examined and extended the hypothesis developed by Grossman and Helpman (1995), illustrating the products which are more likely to be excluded in FTAs. Our results suggest that, with the involvement of political costs, products experiencing trade creation and political sensitivity are more likely to be excluded in FTAs. Moreover, we have revealed that the Chinese government uses its negotiation power to achieve different goals, seeking more economic benefits from big-trading partners while giving more concession to small-trading partners.

Researcher: Soeren Prehn, Yanjie Zhang, Thomas Glauben

Cooperation Partners: Renmin University of China, Guangzhou University