DP14451 Global Value Chains and the Removal of Trade Protection
Author(s): | Chad P. Bown, Aksel Erbahar, Maurizio Zanardi |
Publication Date: | February 2020 |
Keyword(s): | antidumping, global value chains, tariffs, trade liberalization, WTO |
JEL(s): | F13 |
Programme Areas: | International Trade and Regional Economics |
Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=14451 |
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.