Trade imbalance and the endogenous optimal tariff

Endogenous tariff literatures reveal empirically that trade imbalance is negatively related with import tariff, this article gives a theoretical evidence and explanation to support this finding with the methodology of multi-country numerical general equilibrium modelling and simulation. We explore how optimal tariff changes after trade imbalance is introduced, and find that optimal tariffs decrease substantially, either for surplus or deficit countries, when imbalance is considered. Specifically, when the imbalance is modelled in endogenous monetary and inside-money structures, the optimal tariffs decrease by 26% globally on average. Our results suggest that the deepening trade imbalance is beneficial to the global trade liberalization due to its driving tariffs down.     

出口导向贸易政策与发展中国家间FDI竞争——基于寡占竞争模型的理论分析

文章建立了一个两国竞争模型,重点分析了进口关税与出口补贴等战略贸易政策对发展中国家吸引FDI竞争的影响。研究发现:(1)当两国都采取出口补贴的外资激励政策时,工资水平和进口关税对发展中国家间FDI竞争并没有直接影响;(2)对全要素生产率较高的国家来说,当两国的关税水平都较高时,出口补贴政策增加流向本国的FDI,而当两国关税水平大幅下降后,出口补贴政策反而不利于本国FDI竞争。文章的结论对当前我国战略引资和出口退税等政策的调整具有重大的指导意义。     

PUBLIC INVESTMENT,TAX EVASION,AND THE WELFARE EFFECTS OF A TARIFF REFORM

Contrary to the case considered in literature, the experience of developing countries indicates that the tariff reforms have not been revenue neutral due to the heavy dependence of developing countries on trade taxes and pervasive tax evasion. In contrast to the plausibility of a welfare loss shown by the current literature, when the adverse effect of the loss of tariff revenue on public investment is factored in, the welfare outcome of the tariff reforms of past few decades turns out to be much more pessimistic. The constraints imposed by tariff dependence and tax evasion imply that future tariff reforms in these countries should be undertaken after strengthening their domestic tax system and augmenting the ability of their governments to fight tax evasion. For countries of sub‐Saharan Africa, where such reforms are likely to be concentrated, this would need planning and capacity building over a longer time horizon. (JEL D61, D62, F13, H26)     

Effects of trade diversion and trade creation of MERCOSUR on US and world apple markets

Apples are the third most valuable fruit in the United States and account for 18% of US fruit exports. Chile is a major competitor to the United States in the MERCOSUR market, since it is one of the leading apple producing countries and enjoys the tariff reductions as a member of MERCOSUR. Consequently, Chilean exports displace US exports in MERCOSUR. In addition, other MERCOSUR members import more from lower-cost Chile, leading to a reduction in production and an increase in consumption in these countries. This study develops a theoretical and an empirical model of world apple market to quantify the trade diversion and trade creation effects of the MERCOSUR free trade agreement and to estimate the welfare impacts.     

反倾销被诉贸易效应的实证分析与比较——基于1998-2008年动态面板数据模型的SYS-GMM估计

在整理全球反倾销案件的基础上,通过收集相关贸易数据,利用1998-2008年被诉反倾销案件为样本建立动态面板数据模型,实证分析了12个主要国家和地区被诉反倾销的贸易破坏效应和贸易转移效应,通过SYS-GMM估计进行回归估计得到稳健性结果。实证结果表明,反倾销措施对贸易额和出口市场份额的影响远大于关税措施的影响,成为多数国家限制进口、保护本国国内产业的主要贸易政策。反倾销对中国、日本、中国台湾和俄罗斯的负面影响较大。最后考察反倾销对产业竞争力的影响发现,反倾销申诉和反倾销措施对申诉方的产业竞争力有显著的提升作用,并且反倾销措施的影响远大于反倾销申诉的影响。     

新贸易壁垒对策研究(英文)

中国进入世界贸易组织以后,国外将逐步降低对中国设置的贸易壁垒的门槛,进口许可及进口配额等传统的非贸易壁垒也会有所减少,但这并不是说中国的商品就能在国际市场上顺利流通。实际上以技术为中心的新型贸易壁垒正在增加,并将会成为阻碍中国未来国际贸易的最大障碍。而中国缺乏对这一新型贸易壁垒体系的理解,因此当前了解新贸易壁垒的内容意义重大,它有助于中国采取及时、恰当的措施解决新贸易壁垒带来的问题,以适应中国国际贸易的可持续发展。     

Do Preferential Rules of Origin Reverse Trade Creation and Trade Diversion?

Restrictive preferential rules of origin (PROOs) moderate the ‘trade diversion and trade creation’ effects of free trade agreements (FTAs). Moderation effects occur because restrictive PROOs reverse the increase in the relative price of non-member country goods initially caused by FTAs. Such a reversal arises because high compliance costs associated with restrictive PROOs lead to a lower utilization of tariff preferences by member countries. With a lower utilization, the increase in the relative price of non-members country goods would be smaller than it could have been with a full utilization. Thus, restrictive PROOs will lead to less than full trade diversion from non-members to member countries, and less than complete trade creation to member countries. This paper infers the effect of restrictive PROOs on intra-regional trade from the estimated parameters of the revenue function, on the presumption that trade diversion refers to a decrease in the elasticity of substitution between import sources, and that trade creation refers to a difference between the change in import price elasticity and the trade diversion effect. Empirical results support the conjecture that restrictive PROOs move in the opposite direction of FTAs partly undoing the trade diversion and trade creation effects of FTAs.     

TARIFFS AND IMPORTS MISINVOICING UNDER OLIGOPOLY

Mismatch of trade statistics between developed and developing countries indicate a substantial misinvoicing of trade figures, primarily by developing country traders. This is due to the inflexible exchange rate regimes, severe import restrictions and export subsidies prevailing in Less Developed Countries (LDCs). In this paper, we focus on import underinvoicing due to high tariff barriers in a market where domestic producers compete with importers. Specifically, we examine how tariff levels, market structure and government intervention (in the form of intensity of monitoring and severity of penalties) affect the levels of underinvoicing. We also look at the optimal levels of import tariff and instruments of government intervention in these circumstances.     

Preferential Liberalization,Antidumping, and Safeguards: Stumbling Block Evidence from MERCOSUR

There is not yet consensus in the trade agreements literature as to whether preferential liberalization leads to more or less multilateral liberalization. However, research thus far has focused mostly on tariff measures of import protection. We develop more comprehensive measures of trade policy that include the temporary trade barrier (TTB) policies of antidumping and safeguards; studies in other contexts have also shown how these policies can erode some of the trade liberalization gains that arise when examining tariffs alone. We examine the experiences of Argentina and Brazil during the formation of the MERCOSUR over 1990–2001, and we find that an exclusive focus on applied tariffs may lead to a mischaracterization of the relationship between preferential liberalization and liberalization toward non‐member countries. First, any “building block” evidence that arises by focusing on tariffs during the period in which MERCOSUR was only a free trade area can disappear once we also include changes in import protection that arise through TTBs. Furthermore, there is also evidence of a “stumbling block” effect of preferential tariff liberalization for the period in which MERCOSUR became a customs union, and this result tends to strengthen upon inclusion of TTBs. Finally, we also provide a first empirical examination of whether market power motives can help explain the patterns of changes to import protection that are observed in these settings.     

How much do tariffs matter? Evidence from the customs union of Belarus,Kazakhstan and Russia

This paper provides an empirical analysis of the early impact of the formation of the customs union of Belarus, Kazakhstan and Russia, and associated changes in import schedules on the structure of imports. Relying on an original data-set of statutory tariffs we find that trade creation effects were significant only in trade between Russia and third countries, but that there was some trade destruction, with a significant negative impact on imports from China to Kazakhstan and Russia, and on imports from the EU to Belarus. However, the magnitude of this effect is relatively small, suggesting that the benefits of the new tariff policy per se are limited at best.     

Tariff evasion and rules of origin violations under the Canada‐U.S. Free Trade Agreement

Abstract Using product‐level data on trade between Canada and the U.S., this paper presents evidence of tariff evasion and violation of the rules of origin occurring under the Canada‐U.S. Free Trade Agreement (CUSFTA). It shows that more imports go unreported at the destination country when tariffs are higher. Consistent with the tariff evasion hypothesis, this result implies that the trade creation effect of a free trade agreement may in fact be due to less underreporting. Further, this paper shows that the larger Canadian tariff preference margin for the U.S. is associated with more goods originating in third countries being transshipped through the U.S. territory for re‐export. The preference margin is also positively correlated with the value of excess imports from the U.S., which qualify for preferential treatment. Both results suggest the presence of persistent violations of CUSFTA’s rules of origin.     

The impact of trade openness on labour force participation rate

In this article, we investigate the impact of trade openness on labour force participation rate. We use tariff rate as the main indicator of trade openness and we employ the number of regional trade agreements and the average tariff rate in the neighbours’ countries as instrumental variables to diminish the endogeneity problem of the tariff rate. We find that trade openness increases the participation rate which is economically and statistically significant. The results show that this correlation is robust under controlling for different variables and using various specifications. We find that 10 percentage point increase in tariff rate lowers the participation rate by 4–6 percentage point and this relationship is more severe in the long run. Finally, we show that changes in labour force population accounts for about 27% of changes in the unemployment rate following a trade liberalization.     

A Classroom Tariff-Setting Game

The author outlines a classroom tariff-setting game that allows students to explore the consequences of import tariffs imposed by large countries (countries able to influence world prices). Groups of students represent countries, which are organized into trading pairs. Each group's objective is to maximize welfare by choosing an appropriate ad valorem tariff that may be changed intermittently throughout the game. The game is built on a computable general-equilibrium model, which allows each nation's utility and terms of trade under alternative tariff regimes to be expressed quantitatively. The exercise encourages students to consider terms-of-trade improvements and efficiency losses resulting from large-country tariffs and provides a framework to discuss the Nash equilibrium of a tariff war. The game is a useful supplement to traditional teaching methods.     

Trade facilitation and country size

It is argued that compared with large countries, small countries rely more on trade and therefore are more likely to adopt liberal trading policies. The present paper extends this idea beyond the conventional trade openness measures by analyzing the relationship between country size and the number of documents required to export and import, a measure of trade facilitation. Three important results follow. First, trade facilitation does improve as country size becomes smaller; that is, small countries perform better than large countries in terms of trade facilitation. Second, the relationship between country size and trade facilitation is nonlinear, much stronger for the relatively small than the large countries. Third, contrary to what existing studies might suggest, the relationship between country size and trade facilitation does not appear to be driven by the fact that small countries trade more as a proportion of their gross domestic product than the large countries.     

PREFERENTIAL TRADE AGREEMENTS AND MULTILATERAL TARIFF COOPERATION*

Are preferential trade agreements (PTAs) building or stumbling blocks for multilateral trade liberalization? I address this question in an infinitely repeated tariff game between three countries engaged in intraindustry trade under oligopoly. The central result is that when countries are symmetric, a free trade agreement (FTA) undermines multilateral tariff cooperation by adversely affecting the cooperation incentive of the nonmember whereas a customs union (CU) does so via its effect on the cooperation incentives of members. However, when countries are asymmetric with respect to either market size or cost, there exist circumstances where PTAs facilitate multilateral tariff cooperation.     

Trade liberalization and institutional reforms1

The accession of Central and Eastern European (CEE) countries to the European Union (EU) is expected to lead to the new member countries becoming more like the older members, including in terms of trade. In this paper, we focus on two factors promoting CEE–EU trade integration: trade liberalization and institutional reforms. Measures of trade liberalization undertaken by both parties during the 1990s were very substantial, but did not always produce the expected upsurge of regional trade flows. Much less progress has been made in improving the functioning of CEE institutions (e.g., progress in the privatization process or in reducing corruption). Countries where most important changes at the institutional level occurred were also those that most increased their trade with the EU. Comparing the impact of these two factors, we find that improving institutions in CEE countries can generate as much trade as the removal of all tariff and non‐tariff barriers. The paper also addresses the issue of the presence of reversed causality between trade and institutions, and the pro‐trade effect of institutional similarity.     

Tax evasion in Kenya and Tanzania: Evidence from missing imports

In this paper we estimate the amount of tax evasion in customs authorities in both Kenya and Tanzania by calculating measurement errors in reported trade flows between the two countries and correlate those errors with tax rates. We find that the measurement error is correlated with the tax rates in Tanzania. We also introduced a third country into our analysis, the United Kingdom, and tax evasion seems to be more severe in trade flows between Kenya and Tanzania compared to trade flows between the United Kingdom and Kenya/Tanzania. Finally we also find that the tax evasion coefficient is lower in the Kenya–United Kingdom case compared to the Tanzanian–United Kingdom case which suggests that tax evasion is more severe in the Tanzanian customs authority.     

Evaluating the Impact of the US–China Trade War

We evaluate the impact of the US–China trade war using a dynamic computable general equilibrium (CGE) model of global trade. We conduct ex ante simulation analysis exploring three scenarios to understand how the trade war affects import tariffs, investment, and productivity. The escalation of the trade war reduces gross domestic product (GDP) in China and the USA by ?1.41% and ?1.35%, respectively. The trade war reduces nearly all sectoral imports and outputs in both countries. To reflect the important role of global value chains (GVCs), we modify the dynamic CGE model with agent‐specific import demands, and we explore the difference between the results for the two models relating to the trade war impacts on GDP and bilateral trade. When GVCs are accounted for, the negative impacts on bilateral trade are more widespread across countries, and world GDP in the modified model is reduced by ?$US450 billion. These results suggest that the GVCs play substantial role in determining trade responses at the disaggregated level.     

Variable Labor Supply,Terms of Trade Shocks,and Domestic Prices: A Note

This paper develops a two-good, small-country, general-equilibrium trade model with endogenous labor supply, where trade is restricted by a tariff or an import quota. Within this framework, it is shown that, contrary to Anam (1989), under an import quota domestic and world prices may vary in the same direction. This is due to the possibly positive employment effects of terms of trade shocks. In such a case, compared to fixed labor supply, variable labor supply is likely to make the domestic prices less sensitive to foreign price volatility. Received June 13, 2001; revised version received November 14, 2001     

Fortress Europe: Jericho or Château d’If?

Traditional analysis of customs union formation suggests that it leads to an increase in members' external tariffs. This paper stresses two aspects of European trade and trade policy—a large volume of intra-industry trade between similar countries and a political motivation for tariffs—and highlights a role for tariff coordination in a model of differentiated products in which tariffs affect domestic costs and thus export prices and the magnitude of monopolistic rents. We show that when workers choose the tariffs and receive but a small portion of tariff revenues, the union's tariff wall falls.