Designing for Integration: What Trade Agreement Depth Means for GVC Participation

Abstract

This study investigates whether and how the depth of preferential trade agreements (PTAs) influences countries’ participation in global value chains (GVCs). Using bilateral value-added trade data for 75 countries from 1995 to 2019 and normalised indices of PTA depth, and considering both dyadic asymmetries and provision-specific effects, we apply a Poisson pseudo-maximum likelihood gravity model with multiple robustness checks. The results show that deeper agreements significantly increase GVC participation, particularly through backward linkages, by enhancing access to foreign intermediates. However, such benefits are not evenly distributed: low- and middle income countries tend to gain more when engaged in asymmetric partnerships with high-income economies, while the effects of PTA depth are comparatively weaker in South–South relations. Of the provisions examined, investment, services and intellectual property rights (IPR) are the most influential in the full sample; in less-institutionalised settings, only IPR provisions remain robust. These findings support the property rights perspective and underscore the context-dependent nature of deep PTAs. For developing economies, ambitious trade commitments alone may be insufficient to ensure meaningful GVC integration, particularly in the absence of broader conditions that support their effective implementation.

JEL Codes: F13, F14, F15, F60