Deep trade agreements and trade costs

Abstract Deep trade agreements (DTAs) have boomed in recent years and extended their reach well beyond tariff liberalisation. This paper investigates the impact of deep trade agreements on trade costs from a global perspective. The results show that trade costs between partners that sign an agreement with the highest depth decrease by 10.3%. The results are shown to be robust to the consideration of interval data, different measures of the trade agreement depth, different datasets, and alternative estimation strategy. Furthermore, we provide supportive evidence of the spillover effect of DTAs. We find that non‐discriminatory provisions in DTAs significantly lower non‐tariff costs for non‐member countries, especially for agricultural goods.