Digital Trade Rules, New Comparative Advantages, and the Reshaping of the International Division of Labor: Dual Tests Based on Trade Flows and Product Categories

This paper uses natural language processing methods to quantify the depth of digital trade rules in regional trade agreements and empirically examines the mechanisms through which the deepening of digital trade rules reshapes the pattern of international division of labor. The results show that deeper digital trade rules not only increase bilateral trade flows but also enhance the diversity of traded products, and this conclusion remains robust after a series of robustness checks. Mechanism analysis finds that digital trade rules foster new comparative advantages based on data as a factor of production, promote the development of bilateral digital trade, reinforce comparative advantages rooted in traditional factors, improve government governance effectiveness, and deepen the interconnected expansion of bilateral markets, thereby reshaping the pattern of international division of labor. Heterogeneity results show that digital trade rules have a stronger promoting effect on services, exert a more pronounced trade-promoting effect between Global North contracting economies and under 'digital-only' agreements, and that provisions governing the valuation of digital product carriers generate a more evident trade-promoting effect. Furthermore, digital trade rules help increase the forward and backward participation of contracting economies in global value chains, revealing the potential of digital trade rules in promoting a more refined division of labor. This paper provides theoretical support and empirical evidence for understanding the mechanisms through which digital trade rules reshape the pattern of international division of labor.