The United States - Colombia Free Trade Agreement: Beneficial for Colombian firms? Analysis investigating the impact on firm dynamics of Colombian exporting firms
This dissertation investigates the impact of the United States - Colombia Free Trade Agreement (May 15th, 2012) on the export performance, product innovativeness and entry-exit rates of Colombian firms active in the US export market. Two different analyses have been conducted using a comprehensive dataset spanning from 2008 to 2016, covering 715,157 observations and employing three quantitative econometric techniques (Difference-in-Difference Estimator, Propensity Score Matching and Synthetic Control Method). The main analysis, on firm-product level, a rather novel approach, reveals significant negative average results for both export performance (measured in terms of export sales and product portfolio) and product innovation. Colombian firms exporting to the United States experience on average a decline of 10.9% in export sales, a 3.6% reduction in their product portfolio and introduce 0.13 fewer products in comparison to the situation where they benefited from the unilateral ATPA/ATPDEA agreement. While some non-fuel-related industries and small-sized companies benefit from the implementation of the agreement, the majority of medium-sized firms experience a negative impact. The secondary analysis, on country-level, whilst not being conclusive, indicates that Colombian firms were overall stimulated to enter the US export market. However, this trend was particularly driven by the high entry rates of the smallest firms. In general, the results underscore asymmetries in the FTA. This research contributes to understanding the impact of trade agreements on firm dynamics, highlighting sectoral and firm-size variations in response to trade liberalization and indicates that FTAs do not necessarily lead to average positive impacts on firm dynamics for both parties.
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