Switching Between Existing and New Trade Agreements: Evidence From Japan's Imports From Vietnam

ABSTRACT We empirically investigate the utilization rates of the two existing regional trade agreements (RTAs) in Japan's monthly imports from Vietnam from January 2017 to December 2021. In particular, we explore the changes in these rates before and after the commencement of the Comprehensive and Progressive Agreement for Trans‐Pacific Partnership (CPTPP), focusing on the products for which CPTPP offered the lowest tariffs. We did not find significant changes in the utilization rates of either existing RTAs or the most‐favoured nation (MFN) regime before CPTPP's entry in January 2019. However, exporters familiar with the use of preferences (i.e., existing RTA users) appear to have switched to CPTPP first, followed by unfamiliar users (MFN users) who switched to it gradually. Consequently, the introduction of a new RTA was associated with a sustained expansion of trade, unlike the gradual tariff reduction in a single RTA observed in the previous study.