Preferential trade agreements between asymmetric countries: Free trade areas (with rules of origin) vs. customs unions

This paper examines differences in welfare implications between a free trade area (FTA) and a customs union (CU) for member countries differing in their market sizes. In a stylized three-country model of trade under oligopoly, we take into account the conditions that FTA members set external tariffs to induce their exporting firms to comply with rules of origin (ROO) within the trade bloc. This approach rules out trade deflection and regime switches in forming an effective FTA. The key findings are as follows: (i) Unless the difference in market size is too large and ROO are too restrictive, an FTA can be welfare-improving to countries with market size differential. (ii) The formation of a preferential trade agreement (either an FTA or a CU) is more likely to emerge between countries of similar market size. However, forming a CU allows for a greater degree of market size asymmetry than forming an FTA. (iii) Compared to the pre-PTA equilibrium, the greater reductions in external tariffs under an FTA than under a CU remain valid even for the case with market size asymmetry and preferential ROO. As such, a non-member country is relatively better off under an FTA. (iv) World welfare is higher under an FTA than under a CU when the market size asymmetry is moderate and ROO are less restrictive.     

On the optimal external tariff of a free trade area with internal market integration

Previous analyses of free trade areas suggest that member countries reduce external tariffs to the level that improves welfare of non-member countries. Using an oligopoly model with product differentiation, this paper shows that when a free trade area entails endogenous change from segmented to integrated markets for internally produced goods, external tariffs become strategic complements and their equilibrium level is higher than in the market segmentation case. In this case, the non-member may lose from the formation of free trade area whereas each member gains more.     

Free trade zones,tariffs and the real exchange rate

This article examines the consequences of changes in final and intermediate good tariffs on structural adjustment, urban unemployment, and the real exchange rate in the presence of a free trade zone (FTZ) and foreign capital in the host country. The location of the FTZ and the disaggregation of the economy allows us to examine the consequences of a tariff change on regional incomes. It is shown that as a consequence of a tariff change the urban and rural incomes need not necessarily move in the same direction (hence the potential for rural and urban conflict in policy making). It is also shown that an increase in the tariff on an immediate good may result in both export promotion and an increase in welfare. Such expansion is a nonconventional result, since raising barriers to trade normally leads to a contradiction in the volume of the trade. The interconnection between the real exchange rate and intermediate good tariff is also explored in this article. It is shown that a policy of imposing tariffs on these goods may result in the appreciation of the real exchange rate.     

中国—俄罗斯FTA的贸易、关税及福利效应——基于WITS-SMART的模拟分析

当前,中国与俄罗斯亟需通过FTA夯实双方战略伙伴关系的经贸基础。文章利用WITS-SMART模型估算了中俄FTA的贸易、关税以及福利效应,结果显示:随着FTA框架下关税不断削减,中俄两国大多数产品部门都将从贸易规模扩张中受益,尽管两国的关税收入会出现下降,但是整体的经济福利都将获得提升。如果两国能够尽快实现零关税,那么两国之间的贸易往来会获得快速增长。因此,中俄两国需要从战略层面把握中俄FTA建设的重要意义,尽快推动中俄FTA谈判与建设。     

Asia/Pacific Regional Trade Agreements: An empirical study

At the same time as the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) have been encouraging trade liberalized, there has been a proliferation of Regional Trade Agreements (RTAs). These RTAs also aim to reduce trade barriers, but they do so it in a preferential way. There is continued debate as to whether such RTAs are an effective way of achieving free trade, or if increased trade among members causes less trade with non-member countries? If RTAs increase total trade, this is known as ‘trade creation’, whereas if the extra trade occurs at the expense of non-members, this is called ‘trade diversion’. Trade creation implies improved welfare, whereas ‘trade diversion’ may adversely affect welfare. This paper examines five different RTAs using a gravity model to see if they have been trade creating or trade diverting. Annual data from 26 countries covering five RTAs in the Asia and Pacific region for the years 1980–2000 was used.The results show that the effects of the different RTAs varied remarkably. The Association of South East Asian Nations (ASEAN) and the Australian and New Zealand Closer Economic Relations (CER) fostered greater trade with trading partners and with the rest of the world. While the Asian Pacific Economic Cooperation (APEC), the Southern Cone Common Market (MERCOSUR) and the North American Free Trade Association (NAFTA) tended to be trade diverting, that is, they expanded intra-bloc trade at the expense of trade with others.     

Measuring trade creation effects of free trade agreements: Evidence from wine trade in East Asia

East Asia has experienced an unprecedented expansion in its wine market over the past two decades. This paper examines the extent to which import tariff reductions through bilateral free trade agreements (FTAs) have contributed to an increase in wine imports to Japan, China, and South Korea. Our empirical method involves estimating an augmented version of the gravity equation by the Poisson pseudo-maximum likelihood (PPML) technique. Analyzing a panel dataset for 1990–2016 covering 27 exporters, we find that overall a 1 percentage point reduction in tariff among FTA member countries is associated with an increase in the wine import volumes by 0.042%, which is seven times higher than a similar reduction in tariff on an MFN basis. The strongest trade creation effects are founded for bottle wine. The results are robust to various specifications.     

Protection of trade for innovation: the roles of Northern and Southern Tariffs

Using a North–South trade model with innovation and imitation, we investigate the interaction of intellectual property rights (IPR) protection and trade protection. We show that unlike a Southern tariff, a Northern tariff supplements IPR protection and is not necessarily a beggar-thy-neighbor policy. The globally optimal Northern tariff increases as IPR protection in the North or the South decreases. Global welfare may rise as Northern tariff increases, but necessarily declines as Southern tariff increases. This suggests that pushing for freer trade in the South is more urgent than in the North in innovation-intensive sectors where IPR protections are weak in both regions.     

A Note on the Endogenous Timing of Tariff Policy in the Presence of a Time Lag between Production and Trade Decisions

Using the Hamilton–Slutsky extended endogenous timing game of observable delay framework, we analyze the endogenous timing of tariff policy in the presence of a time lag between production and trade decisions. In particular, focusing on the strategic relationships between an importing country’s government and an exporting monopoly firm, we show that a natural Stackelberg situation exists in which the importing country’s government as first mover determines the tariff rate and the exporting monopoly firm as second mover determines the production level. We also find that the natural Stackelberg equilibrium is Pareto superior to both the Nash and alternative Stackelberg equilibria. This implies that commitment to an ex ante optimal tariff policy before the production decision is made is optimal for the affected parties.     

上合组织自贸区经济效应的前瞻性研究--基于GTAP模型的模拟

文章在分析中国同上海合作组织成员国贸易现状的基础上,运用GTAP模型实证研究了建立上合组织自贸区可能带来的经济影响。研究发现建立自贸区虽然在短期内可能存在一定的困难和冲突,但是符合各成员国的长远利益。具体结论如下:从短期来看,大部分成员国贸易放大效应较为明显;各成员国会扩大对比较优势产品的出口,增加对比较劣势产品的进口;各成员国贸易条件和福利水平变化不一,一些小国和落后国家贸易条件恶化,福利水平下降。从长期来看,自贸区的建立能有效拉动各成员国经济增长;随着区域内分工纵深发展,各国产业结构均出现调整。总体来说,完全自由贸易情形下的经济效应要大于设置关税减让例外情形。     

An eye for an eye? The trade and price effects of China's retaliatory tariffs on U.S. exports

We analyze the trade and price effects of China's retaliatory tariffs on imports from the United States in the period from January 2017 to May 2019. We apply the difference-in-differences approach to the up-to-date China Customs data on imports disaggregated by eight-digit HS product category and source country. We find large reductions in the value and quantity of imports from the US and an almost complete tariff pass-through onto import prices. These results remain robust to extensive changes in the specification and in data sample and to a variety of placebo tests using processing imports or exempted products that were originally included in the tariff lists but removed before implementation. We also find that the trade and price effects are heterogeneous across products, differing either in the end-use or in the ownership types of the importing firm. Similar to recent findings in the US (Amiti et al., 2019, Amiti et al., 2020), our estimates suggest limited terms-of-trade gain due to China's tariff hikes.     

数字贸易发展的经济效应与推进方略

作为数字化时代的新型贸易模式,数字贸易将对未来的贸易方式、贸易产品、贸易参与者、贸易规则产生深远影响,具有重要的经济学理论价值和现实价值。从微观市场主体、市场效率以及全球贸易发展新动力等角度来看,数字贸易都能衍生出积极的经济效应,有望进一步提高贸易参与者的福利。但也正因为其全新的生产和交换属性,数字贸易的发展面临诸多制约因素,特别是数字贸易国际规则体系还未有效构建,各国数字贸易监管规则和重点也不同。鉴于此,我国需要从国家层面提高数字贸易战略地位,探索形成数字贸易发展新理念,并着力推动在WTO框架下完善数字贸易规则体系,在双边和区域贸易协定中加强数字贸易规则谈判,同时加快完善数字基础设施建设,探索数字贸易背景下新的产品分类体系。     

How Will the Implementation of Zero Tariffs Affect Employment in China?

This paper studies the employment effect of China's possible implementation of zero tariffs by comparing China's most‐favored‐nation tariffs and the tariff schedules of China's signed free trade agreements (FTAs) with the tariff concessions in a typical high‐standard FTA. It finds that there is a large gap between China's current tariff status and a high‐standard FTA, and the implementation of zero tariffs in China would have a significant negative impact on employment in some industries. However, the employment effect of implementing zero tariffs is heterogeneous. Analysis at the industrial level shows that, although employment would drop in a few industries as a result of the implementation of zero tariffs, more jobs would be created in most industries. The overall employment effect of a zero tariff policy would be positive, creating an estimated 8.05 million jobs in China. Therefore, China should consider the adjustment costs brought by the labor movement in different industries and introduce relevant policies to deal with the employment shocks caused by zero tariffs.     

The upgrading effect of voluntary export restraints

Summary Given that a volume-defined VER is introduced on two differently priced varieties of a good,(i) the transfer of the VER-rent to the exporting country will cause imports of both varieties to fall,(ii) the relative price change in favour of the high cost variety counteracts this import fall and could in fact outweigh it,(iii) an ad valorem tariff restoring the original relative price of the two varieties would increase welfare and that welfare increase could in fact outweigh the welfare loss due to the VER-transfer to the exporting country.     

Expectation-driven fluctuations and welfare loss under free trade in two-country models

This paper investigates the interlinkage in the business cycles based on expectation-driven fluctuations of large-country economies in a free-trade equilibrium. We consider a two-country, two-good, two-factor general equilibrium model with sector-specific externalities. We show that some country's expectation-driven fluctuations can spread throughout the world once trade opens even if the other country has determinacy under autarky. We thus prove that under free trade, globalization and market integration can have destabilizing effects on a country's competitive equilibrium. Finally, we characterize a configuration in which opening to international trade improves the stationary welfare at the world level but deteriorates the stationary welfare of the country that imports investment goods and exports consumption goods. We conclude that in opposition to the standard belief, international trade might not be beneficial to all trading partners in the long run.     

The U.S.–China trade war: Tariff data and general equilibrium analysis

The current trade war between the United States and China is unprecedented in modern history. This study introduces a database of tariff increases resulting from the trade war and quantifies the impacts using the canonical GTAPinGAMS model calibrated to the recently released GTAP version 10 accounts. We find that the remaining tariff increases as of March 2020 after the phase one trade deal decrease welfare in China by 1.7% and welfare in the United States by 0.2%. Impacts on sectoral revenue are reported for both countries. China's exports to and imports from the United States are reduced by 52.3% and 49.3%. The trade flow between the United States and China will be diverted to their major trade partners resulting in higher welfare in those countries, including many Asian countries. The estimated impacts are robust to using alternative trade elasticities and are amplified in the absence of the phase one tariff reductions.     

Who Uses Free Trade Agreements?

The utilization of ASEAN free trade agreements (FTA) is low by international standards. To clarify the reasons for such low utilization, this paper uses unique affiliate‐level data to investigate what kinds of Japanese affiliates in ASEAN are more likely to use an FTA scheme in their exporting. Our findings are as follows. First, the larger the affiliate is, or the more diversified the origins of its procurements, the more likely it is to utilize an FTA scheme in its exporting. Second, affiliates that export actively to countries with higher general tariffs are more likely to use FTA. Third, there are clear differences in FTA utilization depending on affiliates' locations and sectors.     

浅析我国石油进出口贸易

我国石油从贫油到自给,从自给到净出口国,从净出口国到净进口国,从净进口国到对外依存度超过了50%,表明石油的大量消耗已成为我国经济发展的"瓶颈",因此石油进出口贸易对我国保障经济稳步发展具有举足轻重的作用。本文初步分析了我国石油进出口贸易的发展格局,初步提出了我国石油进出口贸易发展策略和建议。     

Reorganization of Intra‐ASEAN 5 Trade Flows: The ‘China Factor’*

There are claims that China's influence on ASEAN is direct in that she has encouraged more exports to flow into her huge markets and changed trade flows among member countries. Demand and supply are thus deemed to have become more China‐centered. This study therefore explores the plausibility of China as a ‘factor’ that influences bilateral intra‐ASEAN 5 trade flows through demand (exporting country) and supply (importing country). The results imply that China's integration in the region increases the size of the key ASEAN member economies export market. There is also no indication that import sourcing from China by ASEAN 5 countries reduces export expansion within the latter. The results accord with the fact that although China has become an important export destination and an import source for individual ASEAN 5 countries, this has not reduced intra‐ASEAN 5 trade.     

Uniform versus Discriminatory Tariffs: When Will Export Taxes Be Used?

This paper examines the noncooperative interactions between two exporting countries and one importing country when all of them are seeking the optimal policies to improve their welfare. Whereas the importing country has the incentive to impose tariffs on the goods coming from the two exporting countries, the export policies chosen by the exporting countries depend on the tariff regime, whether uniform or discriminatory tariffs are used. It is argued that export taxes are chosen by both exporting countries in some cases, and that whereas the importing country prefers a uniform tariff regime, the exporting countries find a discriminatory tariff regime preferable.