- Since the early 2000s, trade agreements include provisions on electronic commerce (E.C.), which we call E-RTAs.
- RTAs that include e-commerce provisions are associated with about 22% less bilateral trade than RTAs without such provisions, once we control for the presence of an RTA.
- Neither the number of e-commerce provisions nor their legal bindingness (dispute settlement mechanism) affects this result.
- The negative average effect masks substantial heterogeneity: e-commerce provisions raise trade between country pairs whose combined development level is sufficiently high.
Since 2001, 76 regional trade agreements (RTAs) have incorporated provisions on electronic commerce, representing 44% of all RTAs signed over the period. We build an original dataset identifying these agreements (which we call E-RTAs) using an algorithm that combines machine learning and text analysis to detect e-commerce provisions in 449 trade agreement texts. We document that E-RTAs are geographically concentrated among a handful of developed economies and that signatory pairs trade less and are farther apart than pairs linked by other RTAs. Using a gravity framework estimated via Poisson pseudomaximum likelihood (PPML), we find that E-RTAs increase trade by less than the average RTA: conditional on the standard RTA dummy, the E-RTA coefficient is -0.245, implying approximately 22 percent less trade. Neither the number of e-commerce provisions nor their legal bindingness affects this result. However, when we interact E-RTA status with a measure of the combined development level of the trading pair, the interaction coefficient is 0.134, and e-commerce provisions increase trade between sufficiently developed country pairs. These results are robust to alternative specifications, estimators, product-level disaggregation, services trade, and tariff controls.
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