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Title: Global Value Chains and the Removal of Trade Protection

Author(s): Chad P. Bown, Aksel Erbahar and Maurizio Zanardi

Publication Date: February 2020

Keyword(s): antidumping, global value chains, tariffs, trade liberalization and WTO

Programme Area(s): International Trade and Regional Economics

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 almost a third of the trade flows subject to the most common temporary restrictions (i.e., antidumping) applied by high-income countries in 2006.

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Bibliographic Reference

Bown, C, Erbahar, A and Zanardi, M. 2020. 'Global Value Chains and the Removal of Trade Protection'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14451