An Evaluation of Swiss Free Trade Agreements Using Matching Econometrics

To date, most estimates of the effects of free trade agreements (FTAs) on international trade flows have used the gravity equation in international trade, but have often yielded highly "fragile" estimates. This paper instead employs a non-parametric "matching" statistical estimation technique of BAIER and BERGSTRAND (2009), using methods developed by ABADIE and IMBENS (2006), to evaluate ex post the impact of Swiss FTAs on Swiss trade flows, including notably the recent Switzerland-Mexico Free Trade Agreement (FTA) on Swiss-Mexico trade flows. The main empirical finding is that the Swiss-Mexico FTA of 2001 increased bilateral trade about 37 percent, after only four years in place. This result is consistent with the impacts (over 10-15 years) of other Swiss FTAs. Moreover, these results are consistent with the findings in BAIER and BERGSTRAND (2007) using parametric panel techniques and with those in BAIER and BERGSTRAND (2009) using matching econometrics that the likely impact of such an agreement on Swiss-Mexico trade after 10-15 years should be approximately 100 percent.