Table <u>4:</u> CAFTA-DR effects controlling for Globalization Dynamics

||(1)<br>Allgoods|(2)<br>Manufacturing|(3)<br>Agriculture|(4)<br>Services|(5)<br>Allgoods|(6)<br>Manufacturing|(7)<br>Agriculture|(8)<br>Services|
|---|---|---|---|---|---|---|---|---|
|RTA|0.13<sup>_∗∗∗_</sup>|0.13<sup>_∗∗∗_</sup>|0.12<sup>_∗∗∗_</sup>|0.06<sup>_∗∗∗_</sup>|0.11<sup>_∗∗∗_</sup>|0.10<sup>_∗∗∗_</sup>|0.13<sup>_∗∗∗_</sup>|0.06<sup>_∗∗∗_</sup>|
||(0.03)|(0.03)|(0.03)|(0.01)|(0.02)|(0.02)|(0.03)|(0.01)|
|RTA_×_ CAFTA|0.13<sup>_∗∗∗_</sup>|0.16<sup>_∗∗∗_</sup>|-0.07<sup>_∗∗_</sup>|-0.01|0.13<sup>_∗∗∗_</sup>|0.14<sup>_∗∗∗_</sup>|0.06|0.07<sup>_∗∗_</sup>|
||(0.03)|(0.04)|(0.03)|(0.03)|(0.04)|(0.05)|(0.05)|(0.03)|
|RTA_×_ CAFTA_×_ US as Exp|-0.57<sup>_∗∗∗_</sup>|-0.58<sup>_∗∗∗_</sup>|-0.29<sup>_∗∗∗_</sup>|-0.13<sup>_∗∗∗_</sup>|-0.28<sup>_∗∗∗_</sup>|-0.27<sup>_∗∗∗_</sup>|-0.21<sup>_∗∗∗_</sup>|-0.14<sup>_∗∗∗_</sup>|
||(0.06)|(0.06)|(0.07)|(0.04)|(0.06)|(0.06)|(0.07)|(0.04)|
|RTA_×_ CAFTA_×_ US as Imp|-0.32<sup>_∗∗∗_</sup>|-0.33<sup>_∗∗∗_</sup>|-0.07|-0.15<sup>_∗∗∗_</sup>|-0.16<sup>_∗∗∗_</sup>|-0.16<sup>_∗∗∗_</sup>|-0.07|-0.08|
||(0.06)|(0.06)|(0.05)|(0.05)|(0.06)|(0.06)|(0.06)|(0.06)|
|TOTAL CAFTA|0.27<sup>_∗∗∗_</sup>|0.29<sup>_∗∗∗_</sup>|0.05|0.05|0.24<sup>_∗∗∗_</sup>|0.24<sup>_∗∗∗_</sup>|0.19<sup>_∗∗∗_</sup>|0.13<sup>_∗∗∗_</sup>|
||(0.05)|(0.05)|(0.04)|(0.03)|(0.05)|(0.06)|(0.07)|(0.04)|
|TOTAL CAFTA - US as Exp|-0.30<sup>_∗∗∗_</sup>|-0.30<sup>_∗∗∗_</sup>|-0.24<sup>_∗∗∗_</sup>|-0.08<sup>_∗∗∗_</sup>|-0.03|-0.03|-0.03|-0.01|
||(0.05)|(0.05)|(0.05)|(0.03)|(0.04)|(0.04)|(0.07)|(0.03)|
|TOTAL CAFTA - US as Exp|-0.05|-0.04|-0.01|-0.09<sup>_∗∗_</sup>|0.09<sup>_∗_</sup>|0.08|0.12<sup>_∗∗∗_</sup>|0.05|
||(0.04)|(0.04)|(0.03)|(0.04)|(0.04)|(0.05)|(0.03)||
|Group globalization|NO|NO|NO|NO|YES|YES|YES|YES|
|Observations|425984|425984|425984|425984|425958|425958|425958|425958|

**Note:** All goods refer to manufacturing and agricultural products. All regressions use the PPML estimator with exporter-time, country-pair and importer-time fixed effects. Border-time controls are also included in all regressions. Robust standard errors, clustered at the country-pair level, are in parentheses. _∗ p <_ 0.10,** _p <_ 0.05,*** _p <_ 0.01

across all sub-sectors, except transport, where the result is not statistically significant (Figure (1)) Regarding Central American exports to the U.S., the statistically insignificant results are also consistent across sub-sectors.

We now focus on manufacturing and agricultural products ("all goods") to estimate the country and country-pair-specific effects. Figure (2) shows that at this level of disaggregation, most effects are positive. The largest effects are for intra-regional trade for El Salvador’s exports. The lowest, negative, effects seem to be on exports to the US from Costa Rica and Honduras. The case of Costa Rica is partly explained by the decline in electronics around 2013.<sup>15</sup> In spite of some negative effects, no country in Central America displays a negative total effect of CAFTA-DR on trade, and several estimates, in particular in intra-regional trade, are positive.

# **5.3 GVC dimension**

Following the growing importance of Global Value Chains (GVCs), we now focus on the CAFTA-DR effect on GVC trade flows. We do it for two reasons. First, it allows us to understand whether CAFTA-DR has contributed to supply chain integration. Second, it offers a way to estimate the effect on economic activity through the effect on the domestic 15This is related to the exit of Intel as an assembler of microchips in Costa Rica.

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