How Did China's WTO Entry Benefit U.S. Consumers?

53 Pages Posted: 5 Jun 2017

See all articles by Mary Amiti

Mary Amiti

Federal Reserve Bank of New York

Mi Dai

Beijing Normal University (BNU)

Robert C. Feenstra

University of California, Davis - Department of Economics; National Bureau of Economic Research (NBER)

John Romalis

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: June 2017

Abstract

China's rapid rise in the global economy following its 2001 WTO entry has raised questions about its economic impact on the rest of the world. In this paper, we focus on the U.S. market and potential consumer benefits. We find that the China trade shock reduced the U.S. manufacturing price index by 7.6 percent between 2000 and 2006. In principle, this consumer welfare gain could be driven by two distinct policy changes that occurred with WTO entry. The first, which has received much attention in the literature, is the U.S. granting permanent normal trade relations (PNTR) to China, effectively removing the threat of China facing very high tariffs on its exports to the U.S. A second, new channel we identify is China reducing its own input tariffs. Our results show that China's lower input tariffs increased its imported inputs, boosting Chinese firms' productivity and their export values and varieties. Lower input tariffs also reduced Chinese export prices to the U.S. market. In contrast, PNTR had no effect on Chinese productivity nor export prices, but did increase Chinese entry into the U.S. export market. We find that at least two-thirds of the China WTO effect on the U.S. price index of manufactured goods was through China lowering its own tariffs on intermediate inputs.

Suggested Citation

Amiti, Mary and Dai, Mi and Feenstra, Robert C. and Romalis, John, How Did China's WTO Entry Benefit U.S. Consumers? (June 2017). CEPR Discussion Paper No. DP12076. Available at SSRN: https://ssrn.com/abstract=2980856

Mary Amiti (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Mi Dai

Beijing Normal University (BNU) ( email )

19 Xinjiekou Outer St
Haidian District
Beijing, Guangdong 100875
China

Robert C. Feenstra

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States
916-752-9240 (Phone)
916-752-9382 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

John Romalis

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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