Global Supply Chains and Trade Policy

65 Pages Posted: 20 Jan 2016

See all articles by Emily J. Blanchard

Emily J. Blanchard

Dartmouth College - Tuck School of Business

Chad P. Bown

Peterson Institute for International Economics

Robert C. Johnson

University of Notre Dame - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: January 2016

Abstract

How do global supply chain linkages modify countries' incentives to impose import protection? Are these linkages empirically important determinants of trade policy? To address these questions, we introduce supply chain linkages into a workhorse terms-of-trade model of trade policy with political economy. Theory predicts that discretionary final goods tariffs will be decreasing in the domestic content of foreign-produced final goods. Provided foreign political interests are not too strong, final goods tariffs will also be decreasing in the foreign content of domestically-produced final goods. We test these predictions using newly assembled data on bilateral applied tariffs, temporary trade barriers, and value-added contents for 14 major economies over the 1995-2009 period. We find strong support for the empirical predictions of the model. Our results imply that global supply chains matter for trade policy, both in principle and in practice.

Suggested Citation

Blanchard, Emily J. and Bown, Chad P. and Johnson, Robert C., Global Supply Chains and Trade Policy (January 2016). NBER Working Paper No. w21883, Available at SSRN: https://ssrn.com/abstract=2717294

Emily J. Blanchard (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

Chad P. Bown

Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Robert C. Johnson

University of Notre Dame - Department of Economics ( email )

Notre Dame, IN 46556
United States

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