Learning to Use Trade Agreements
Preferential trade areas (PTAs) allow firms to pay zero or preferential tariffs as long as Rules of Origin (ROOs) are met. Meeting them is costly for exporters not only in terms of production costs but also in terms of fixed costs, such as documentation costs. We ask if these fixed costs change with the experience of exporters in obtaining preferential tariffs. We explore this using a unique exporter-importer matched transaction-level customs data set on a group of Latin American countries. We estimate a model-based equation and show that these fixed costs depend on the history of preference utilization.
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