Three Essays on Preferential Trade Agreement and Trade Policy

This dissertation consists of three chapters on Preferential Trade Agreements (PTAs) and trade policies. Increasing in numbers rapidly since 1990s, PTAs have extended their traditional focus on tariff reduction to deeper policy integration in areas such as competition policy, intellectual property rights, investment, and movement of capital. The first chapter of the dissertation uses a recently released dataset of PTA contents to quantify impacts of the horizontal depth of trade agreements on bilateral trade flows and national welfare for the period of 1980-2015. The results indicate that agreements that are deeper (covering a wider range of policy areas) contribute to larger trade growth and welfare gain. The second chapter of the dissertation expands the above analysis by using synthetic control matching (SCM) methods to obtain time-varying trade effects of PTAs, and isolates from the estimated total PTA effect the part contributed by different horizontal depths (coverages) of trade agreements. Built on the Anderson and van Wincoop (2003)'s set-up, we decompose and quantify the welfare effects of PTA deep integration for the different horizontal depths (coverages) of trade agreements for the period of 1988-2015, while controlling for the effect of tariff barriers. The third chapter of the dissertation analyses the short-run impact of 2018-2019 U.S.-China trade war on the Chinese economy, following the micro-to-macro approach of Fajgelbaum et al. (2020). We use highly disaggregated trade and tariff data with monthly frequency to identify the demand/supply elasticities of Chinese imports/exports, combined with a general equilibrium model for the Chinese economy to quantify the partial and general equilibrium effects of the tariff war at the product/region/aggregate levels. This complements the studies focused on the ex post response of the U.S. economy by Amiti et al. (2019), Flaaen et al. (2020), Fajgelbaum et al. (2020), and Cavallo et al. (2021).