Phase Out Tariffs, Phase in Trade?

66 Pages Posted: 30 Apr 2019

See all articles by Tibor Besedes

Tibor Besedes

Georgia Institute of Technology

Tristan Kohl

University of Groningen - Faculty of Economics and Business

James Lake

Southern Methodist University (SMU) - Department of Economics

Date Written: 2019

Abstract

What causes U.S. trade with Mexico and Canada to continue growing faster, for up to a decade, relative to countries with which the U.S. does not have a free trade agreement? Baier and Bergstrand (2007) suggest that tariff phase-out and delayed pass-through of tariffs into import prices could cause such prolonged differential import growth. We examine how tariff cuts negotiated under the Canada-US Free Trade Agreement and the North American Free Trade Agreement (NAFTA) affected U.S. import growth in 1989{2016 using detailed product-level data on tariff phase-out in the original treaties. We find essentially no evidence for the tariff phase-out or delayed pass through explanations. Rather, we find evidence for an important role played by NAFTA tariff cuts reducing the impacts of frictions at various extensive margins.

Keywords: free trade agreements, CUSFTA, NAFTA, trade, phase-out, tariffs, extensive margin

JEL Classification: F100

Suggested Citation

Besedes, Tibor and Kohl, Tristan and Lake, James, Phase Out Tariffs, Phase in Trade? (2019). CESifo Working Paper No. 7614, Available at SSRN: https://ssrn.com/abstract=3378824 or http://dx.doi.org/10.2139/ssrn.3378824

Tibor Besedes (Contact Author)

Georgia Institute of Technology ( email )

221 Bobby Dodd Way
Atlanta, GA 30332-0615
United States

Tristan Kohl

University of Groningen - Faculty of Economics and Business ( email )

P.O. Box 800
Groningen, Groningen 9700 AV
Netherlands

HOME PAGE: http://www.tristankohl.org

James Lake

Southern Methodist University (SMU) - Department of Economics ( email )

Dallas, TX 75275
United States

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