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Time to Concentrate Efforts on Effective FTA Utilization

The more extensive use of FTAs requires a reflection on the following matters.

First, there is a need to define the accurate measurements and concepts of FTA utilization. In order to understand the current state FTA implementation, we must make accurate calculations of export utilization rates. To this end, the parties concerned should discuss the exchange of statistics at the FTA implementation committee. Another problem regarding the FTA utilization rate is that this calculation excludes companies which do not currently export but have plans to do so. Furthermore, this measurement does not distinguish newly traded firms or products (extensive margin) from already-traded ones (intensive margin). To assess whether an FTA creates a new export opportunity, it is necessary to use measurements that distinguish between all of the cases listed above.

Second, the implementation status of the FTA should be evaluated from a variety of angles. It is inevitable to focus on indices that can be obtained from objective analysis through a statistical approach. However, it must be noted that each trade treaty may have different policy objectives and negotiation goals. Given that each treaty has a different area of specific priority, it is not appropriate to evaluate treaties through the same approach. Instead, we should focus on whether each treaty achieves its policy objectives.

Finally, we shed light on consumer surplus and importers utilization. Judging by articles that cover FTA negotiations and implementation achievements, import growth is viewed in a negative light. However, we should understand that import growth on the back of FTAs plays an important role: enhancing the competitiveness of products using imported intermediate goods, building a healthy competitive environment, reducing consumption prices, and introducing a wide variety of products.  

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