Do temporary trade barriers substitute tariff reductions in China?

ABSTRACT

Starting from the trade policy substitution hypothesis, this paper uses detailed product-level data from 1997 to 2015 to supplement empirical evidence in China. We find that to the extent permitted by the WTO, there is a substitution relationship between temporary trade barriers and tariff reductions in China. Among the three types of temporary trade barriers, antidumping is the most frequent tool and presents a remarkably negative relationship with tariff reductions. After a set of robustness tests, the relationship still holds. Therefore, this paper verifies the trade policy substitution hypothesis and provides theoretical support for trade policy practice in the context of trade liberalization.

KEYWORDS:

• Trade policy substitution
• tariff reductions
• temporary trade barrier
• anti-dumping

JEL CODES:

• F13; F14

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ These 136 products cover 11 categories and 20 chapters in Harmonized Commodity Description and Coding System (HS) code (1992 edition).

² 19 countries and economies include Brazil, Canada, European Union (28 member countries in sample period), India, Indonesia, Japan, Kazakhstan, Korea, Mexico, Malaysia, New Zealand, Russia, Saudi Arabia, Singapore, Thailand, Turkey, Ukraine, USA, and South Africa.

³ We aggregate the HS-8 code to HS-6 code and unify the HS-6 code in different year to the 1992 version.

⁴ 19 countries and economies include Brazil, Canada, European Union (28 member countries in sample period), India, Indonesia, Japan, Kazakhstan, Korea, Mexico, Malaysia, New Zealand, Russia, Saudi Arabia, Singapore, Thailand, Turkey, Ukraine, USA, and South Africa.

⁵ Note that BACI database converts the unit of trade flows into tons using mirror flows, and the trade values are reported in thousands of US dollars. Accordingly, by dividing trade values by trade quantities, we estimate each year’s unit-values of products exported to China.

⁶ We will adopt other measurements of tariff reduction in robustness test to check the credibility of estimates.

Additional information

Funding

The work was supported by the National Office for Philosophy and Social Sciences [18BGJ015].