Global Value Chains and the Removal of Trade Protection

43 Pages Posted: 11 May 2020

See all articles by Chad P. Bown

Chad P. Bown

Peterson Institute for International Economics; Centre for Economic Policy Research (CEPR)

Aksel Erbahar

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Tinbergen Institute

Maurizio Zanardi

University of Surrey - School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: February 28, 2020

Abstract


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 World Trade Organization (WTO) rules adopted in 1995 that impose an exogenously timed requirement for countries to reevaluate 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.

Keywords: global value chains, trade protection, antidumping

JEL Classification: F13, F14, F68

Suggested Citation

Bown, Chad P. and Erbahar, Aksel and Zanardi, Maurizio, Global Value Chains and the Removal of Trade Protection (February 28, 2020). Peterson Institute for International Economics Working Paper No. 20-3, Available at SSRN: https://ssrn.com/abstract=3577890 or http://dx.doi.org/10.2139/ssrn.3577890

Chad P. Bown (Contact Author)

Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Aksel Erbahar

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Maurizio Zanardi

University of Surrey - School of Economics ( email )

Guildford, Surrey GU2 7XH
United Kingdom

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