Working Paper: CEPR ID: DP14451
Authors: Chad P. Bown; Aksel Erbahar; Maurizio Zanardi
Abstract: This paper examines how trade protection is affected by changes in the value-added content of production arising through global value chains (GVCs). Exploiting a new set of WTO rules adopted in 1995 that impose an exogenously-timed requirement for countries to re-evaluate their previously-imposed trade protection, we adopt an instrumental variables strategy and identify the causal effect of GVC integration on the likelihood that a trade barrier is removed. Using a newly constructed dataset of protection removal decisions involving 10 countries, 41 trading partners, and 18 industries over 1995-2013, we find that bilateral industry-specific domestic value-added growth in foreign production significantly raises the probability of removing a duty. The results are not limited to imports from China but are only found for the protection decisions of high-income countries. Back-of-the-envelope calculations indicate that rapid GVC growth in the 2000s freed 15% of the trade flows subject to the most common temporary restrictions (i.e., antidumping) applied by high-income countries in 2007.
Keywords: global value chains; tariffs; antidumping; WTO; trade liberalization
JEL Codes: F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| GVC integration (F12) | likelihood of trade barrier removal (F14) |
| bilateral industry-specific domestic value-added (DVA) growth in foreign production (F23) | likelihood of removing antidumping duties (F18) |
| bilateral industry-specific domestic value-added (DVA) growth in foreign production (F23) | trade barrier removal (F13) |
| DVA growth (O00) | trade policy decisions for high-income countries (F13) |
| DVA growth (O00) | trade policy decisions for emerging economies (F13) |