Experts say that because the majority of bilateral agreements with small states are, the benefits are modest for the huge U.S. economy. According to a Heritage Foundation report, four months after the U.S.-Australia Free Trade Agreement came into force, the U.S. trade surplus with Australia increased by 32 percent to more than $2 billion. The same report cited a $4 billion increase in U.S. exports to Chile and Singapore following the implementation of free trade agreements with these countries. A recent congressional Research Service report cites a model that projects a free trade agreement with South Korea under discussion, which would result in $30 billion in trade benefits to the U.S. economy. A bilateral trade agreement gives privileged trade status between two nations. By giving them access to each other`s markets, they increase trade and economic growth. The terms of the agreement harmonize commercial activity and a level playing field. In this study, we examine the effectiveness of NTOs by measuring their impact on trade flows between the economic sectors of the various contracting states.

To this end, we consider all trade relations as an international trade network (ITN) in which sectors (nodes) are linked by their volume of trade. The theory of networks applied to commercial economics has gained strength in recent years, since it allows to integrate topological properties in the analysis [18, 19]. Studies on the formation and structure of economic dependencies [20], the resistance of the commercial system to a failure of an industry or production facility [21, 22] and the dissemination of knowledge and technology related to growth [23] are remarkable examples. Unlike gravity models often used for related analyses [3, 5, 6], we can thus take into account higher orders of reciprocal economic interdependencies. In this work, such reliance on the higher order reflects the fact that TATs could also influence the demand and supply of sectors indirectly linked to the export and import sector. The existence of these indirect effects was recently revealed by [24], which shows that countries more linked to trade agreements benefit from the fact that they export more than those that are more isolated. Taking into account all direct and indirect inflows and exits within and between two countries, we are putting in place a quantitative framework for measuring the interconnection of trade (IT) between two ITN countries. Taking into account all direct and indirect dependencies thus improves the SPC measure proposed recently by Wenz and Levermann [21], which is limited to the measurement of direct dependencies. In addition, we assess the impact of NTOs by assessing the evolution over time of IT, taking into account both the trend and changes in IT size after the implementation date of a trade agreement.

These methods, as well as the description of the data used for this study, are presented in Section 2 of this contribution. We analyze the impact of BTAs in general based on the 107 agreements that came into force in Chapter 3 between 1995 and 2008. In particular, we compare the results of BTAs formed by the United States and China, thus providing empirical quantitative evidence of the proposed strategic differences in the negotiation of BTAs. A sensitivity study of our results, along with further in-depth discussions on the effect of certain parameters of our analysis, is presented in Section 4 before this paper concludes with a discussion in Section 5. 7. Dai M, Yotov YV, Zylkin T. On the impact of free trade agreements on trade diversion.