TY - JOUR

T1 - Peeling away the layers: Impacts of durable tariff elimination

AU - Gnutzmann-Mkrtchyan, Arevik

AU - Henn, Christian

N1 - Funding Information: The views expressed in this paper are those of the authors and do not necessarily represent the position or opinions of the WTO or its Members, or of the IMF, its Executive Board or IMF management. Any remaining errors are responsibility of the authors. This paper required substantive preparatory work to address issues related to product coverage and membership of the ITA that was possible due to assistance of WTO delegations and secretariat staff, in particular Florian Eberth, Rainer Lanz and Roy Santana. The authors thank seminar participants at the ETSG 2014 Annual Conference in Munich, the Geneva Trade and Development Workshop, and the November 2014 Joint IMF-World Bank-WTO Trade Conference. They also thank Marc Bacchetta, Cosimo Beverelli, Theo S. Eicher, Hinnerk Gnutzmann, Jasmin Groeschl, Paulo Guimaraes, Inmaculada Martínez-Zarzoso, Alberto Osnago, Chris Papageorgiou, Roberta Piermartini, Xiaobing Tang, Robert Teh, and Yoto Yotov for suggestions on this research. They are grateful to Timothy Sturgeon for kindly sharing his data on classifications of goods into intermediate and final. Arevik Gnutzmann-Mkrtchyan gratefully acknowledges funding support received from the ITTC Support Programme for Doctoral Studies at the WTO. Funding Information: The views expressed in this paper are those of the authors and do not necessarily represent the position or opinions of the WTO or its Members, or of the IMF, its Executive Board or IMF management. Any remaining errors are responsibility of the authors. This paper required substantive preparatory work to address issues related to product coverage and membership of the ITA that was possible due to assistance of WTO delegations and secretariat staff, in particular Florian Eberth, Rainer Lanz and Roy Santana. The authors thank seminar participants at the ETSG 2014 Annual Conference in Munich, the Geneva Trade and Development Workshop, and the November 2014 Joint IMF- World Bank -WTO Trade Conference. They also thank Marc Bacchetta, Cosimo Beverelli, Theo S. Eicher, Hinnerk Gnutzmann, Jasmin Groeschl, Paulo Guimaraes, Inmaculada Martínez-Zarzoso, Alberto Osnago, Chris Papageorgiou, Roberta Piermartini, Xiaobing Tang, Robert Teh, and Yoto Yotov for suggestions on this research. They are grateful to Timothy Sturgeon for kindly sharing his data on classifications of goods into intermediate and final. Arevik Gnutzmann-Mkrtchyan gratefully acknowledges funding support received from the ITTC Support Programme for Doctoral Studies at the WTO.

PY - 2018/11

Y1 - 2018/11

N2 - We demonstrate that durable MFN tariff elimination affects trade patterns through several layers, and magnitudes of effects are sizable. The WTO Information Technology Agreement's (ITA) unique setting allows us to overcome the challenges associated with identifying effects of non-discriminatory trade policies due to two reasons: (i) ITA constitutes a quasi-natural experiment of several “passive” signatories joining the agreement as an unavoidable part of pursuing a larger policy objective, and (ii) ITA's partial coverage of the IT sector provides a natural control group for identification based on cross-product variation. Our analysis finds novel nonlinear impacts of tariff liberalization: Complete tariff elimination results in large additional trade gains – over and above tariff reductions – especially for intermediate goods. The commitment to durable tariff elimination, through WTO bindings, adds another two layers, boosting both imports and exports more than equivalent unilateral reforms. This commitment spurned development of a downstream IT export sector in “passive” signatories.

AB - We demonstrate that durable MFN tariff elimination affects trade patterns through several layers, and magnitudes of effects are sizable. The WTO Information Technology Agreement's (ITA) unique setting allows us to overcome the challenges associated with identifying effects of non-discriminatory trade policies due to two reasons: (i) ITA constitutes a quasi-natural experiment of several “passive” signatories joining the agreement as an unavoidable part of pursuing a larger policy objective, and (ii) ITA's partial coverage of the IT sector provides a natural control group for identification based on cross-product variation. Our analysis finds novel nonlinear impacts of tariff liberalization: Complete tariff elimination results in large additional trade gains – over and above tariff reductions – especially for intermediate goods. The commitment to durable tariff elimination, through WTO bindings, adds another two layers, boosting both imports and exports more than equivalent unilateral reforms. This commitment spurned development of a downstream IT export sector in “passive” signatories.

KW - Global value chains

KW - Information Technology Agreement

KW - MFN tariff elimination

KW - Non-discriminatory trade policies

KW - Product-level data

KW - Trade policy certainty

KW - World Trade Organization

UR - http://www.scopus.com/inward/record.url?scp=85055121593&partnerID=8YFLogxK

U2 - 10.1016/j.jinteco.2018.09.003

DO - 10.1016/j.jinteco.2018.09.003

M3 - Article

AN - SCOPUS:85055121593

VL - 115

SP - 259

EP - 276

JO - Journal of international economics

JF - Journal of international economics

SN - 0022-1996

ER -