Unlocking the impact of US free trade agreements on industries with a synthetic control approach

Abstract

This study explores the industry‐level effects of the FTAs that the United States signed with Chile, Australia and the Dominican Republic between 2004 and 2007. Employing a synthetic control approach, we uncover heterogeneity in post‐FTA export growth across countries and industries. The study reveals that only a limited subset of industries in the US, which contributed to roughly one seventh of pre‐FTA exports, experienced post‐FTA export gains. No single industry consistently benefited from the FTAs with all three partners. This heterogeneity is present in countries where FTA‐induced aggregate export growth is absent, as well as in those where only a few industries drive the aggregate export growth. Export increases were also concentrated in a limited range of products. Notably, only exports to Chile led to increased export intensity and diversification at both the aggregate and industry levels. These findings, robust to various specifications and estimation methods, highlight the substantial variation in FTA effects across industries and partner countries.