Advertisement

Competing liberalizations: tariffs and trade in the twenty-first century

  • Jean-Christophe Bureau
  • Houssein Guimbard
  • Sébastien JeanEmail author
Original Paper

Abstract

This paper proposes a unique overview of trade policies since 2001, based on detailed data on tariffs and trade covering 130 countries. It shows that regionalism has delivered limited liberalization, representing only a 0.3 percentage point (p.p.) cut in the worldwide average applied tariff between 2001 and 2013. WTO commitments (1.0 p.p. average cut) and unilateral liberalizations on a most-favored-nation basis (1.3 p.p.) mattered far more. The study also shows that GVC participation was a powerful motivation underlying tariff liberalizations, including those carried out at governments’ own initiative. The paper finally assess that recent trade policy changes more than halved the worldwide welfare gains expected from multilateral tariff-cutting. If all PTA negotiations were concluded, gains would fall to one-third of their 2001 level.

Keywords

Regional trade agreements Unilateral liberalization Doha development agenda WTO Global value chains 

JEL Classification

F10 F13 F14 

Notes

Acknowledgements

Bureau and Jean benefited from support by the European Union’s Seventh Framework Programme FP7/2007–2011 under Grant Agreement 290693 Foodsecure. The authors only are responsible for any omissions or deficiencies. Neither the Foodsecure project partner organizations nor any organization of the European Union are accountable for the content of this paper. The authors are indebted to Mondher Mimouni and Xavier Pichot for making tariff protection data available to them, and for helpful discussions. They would like to thank the editor Gerald Willmann and two anonymous referees for their valuable suggestions.

References

  1. Alchian, A., & Allen, W. (1964). University Economics. Belmont, CA: Wadsworth Publishing Company.Google Scholar
  2. Armington, P. S. (1969). A theory of demand for products distinguished by place of production. International Monetary Fund Staff Papers, 16(1), 159–178.CrossRefGoogle Scholar
  3. Bagwell, K., & Staiger, R. (2013). Can the Doha round be a development round? Setting a place at the table. In R. C. Feenstra & A. M. Taylor (Eds.), Globalization in an age of crisis: Multilateral economic cooperation in the twenty-first century (pp. 91–124). USA: University of Chicago Press.CrossRefGoogle Scholar
  4. Baldwin, R. (2016). The great convergence: Information technology and the new globalization. Cambridge: Belknap Press of Harvard University Press.Google Scholar
  5. Baldwin, R. E. (2011). Trade and industrialisation after globalisation’s 2nd unbundling: How Building and joining a supply chain are different and why it matters (NBER Working Paper 17716).Google Scholar
  6. Baldwin, R., & Freund, C. (2011). Preferential trade agreements and multilateral liberalization. In Chauffour, J.-P. & Maur, J.-C. (Eds.), Preferential trade agreement policies for development (pp. 121–141). World Bank.Google Scholar
  7. Bchir, M.-H., Jean, S., & Laborde, D. (2006). Binding overhang and tariff-cutting formulas. Review of World Economics, 142(2), 207–232.CrossRefGoogle Scholar
  8. Bergsten, C. F. (1991). Commentary: The move toward free trade zones. Economic Review, Federal Reserve Bank of Kansas City, 76, 27–35.Google Scholar
  9. Beshkar, M., Bond, E., & Rho, Y. (2015). Tariff binding and overhang: Theory and evidence. Journal of International Economics, 97(1), 1–13.CrossRefGoogle Scholar
  10. Bhagwati, J. N. (1991). The world trading system at risk. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
  11. Blanchard, E. J., Bown, C. P., & Johnson, R. C. (2016). Global supply chains and trade policy (NBER Working Paper 21883).Google Scholar
  12. Bouët, A., Decreux, Y., Fontagné, L., Jean, S., & Laborde, D. (2008). Assessing applied protection across the world. Review of International Economics, 16(5), 850–863.Google Scholar
  13. Bown, C. P. (2011). Taking stock of antidumping, safeguards and countervailing duties, 1990–2009. The World Economy, 34(12), 1955–1998.CrossRefGoogle Scholar
  14. Cadot, O., & Gourdon, J. (2016). Non-tariff measures, preferential trade agreements, and prices: new evidence. Review of World Economics (Weltwirtschaftliches Archiv), 152(2) 227–249.Google Scholar
  15. Caliendo, L., Feenstra, R. C., Romalis, J., & Taylor, A. M. (2016). Tariff reductions, entry, and welfare: Theory and evidence for the last two decades (NBER Working Paper No. 21768).Google Scholar
  16. De Backer, K., & Miroudot, S. (2013). Mapping global value chains (OECD Trade Policy Papers, No. 159). Paris: OECD Publishing.Google Scholar
  17. Diakantoni, A., & Escaith, H. (2009). Mapping the tariff waters (WTO Staff Working Papers No. ERSD-2009-13).Google Scholar
  18. Estevadeordal, A., Freund, C., & Ornelas, E. (2008). Does regionalism affect trade liberalization toward nonmembers? The Quarterly Journal of Economics, 123(4), 1531–1575.CrossRefGoogle Scholar
  19. Fontagné, L., Fouré, J., & Ramos, M. P. (2013). MIRAGE-e: A general equilibrium long-term path of the world economy. (CEPII Working Paper No. 2013-39).Google Scholar
  20. Fontagné, L., Orefice, G., Piermartini, R., & Rocha, N. (2015). Product standards and margins of trade: Firm-level evidence. Journal of International Economics, 97(1), 29–44.CrossRefGoogle Scholar
  21. Fouré, J., Bénassy-Quéré, A., & Fontagné, L. (2013). Modelling the world economy at the 2050 horizon. Economics of Transition, 21(4), 617–654.Google Scholar
  22. Francois, J., & Martin, W. (2003). Formula approaches for market access negotiations. World Economy, 26(1), 1–28.CrossRefGoogle Scholar
  23. Gaulier, G., & Zignago, S. (2010). BACI: International trade database at the product-level. The 1994–2007 Version (CEPII Working Paper No. 2010-23).Google Scholar
  24. Gawande, K., Hoekman, B., & Cui, Y. (2014). Global supply chains and trade policy responses to the 2008 crisis. The World Bank Economic Review, 29(1), 102–128.CrossRefGoogle Scholar
  25. Goldberg, P. K., Khandelwal, A. K., Pavcnik, N., & Topalova, P. (2010). Imported intermediate inputs and domestic product growth: Evidence from India. The Quarterly Journal of Economics, 125(4), 1727–1767.CrossRefGoogle Scholar
  26. Grossman, G. M., & Helpman, E. (1995). The politics of free-trade agreements. The American Economic Review, 85(4), 667–690.Google Scholar
  27. Guimbard, H., Jean, S., Mimouni, M., & Pichot, X. (2012). MAcMap-HS6 2007, an exhaustive and consistent measure of applied protection in 2007. International Economics, 130, 99–122.CrossRefGoogle Scholar
  28. Handley, K., & Limão, N. (2017). Policy uncertainty, trade, and welfare: theory and evidence for China and the United States. American Economic Review, 107(9), 2731–2783.CrossRefGoogle Scholar
  29. Hertel, T., Hummels, D., Ivanic, M., & Keeney, R. (2007). How confident can we be of CGE-based assessments of free trade agreements? Economic Modelling, 24(4), 611–635.CrossRefGoogle Scholar
  30. Horn, H., Mavroidis, P. C., & Sapir, A. (2010). Beyond the WTO? An anatomy of EU and US preferential trade agreements. The World Economy, 33(11), 1565–1588.CrossRefGoogle Scholar
  31. Hufbauer, G. C., & DeRosa, D. A. (2007). What do gravity models tell us about PTAs’ impact on trade flows: More creation or more diversion? Vox, CEPR. Available at http://www.voxeu.org/article/free-trade-agreements-and-trade-liberalisation. Accessed 28 Mar 2019.
  32. IEA (2015). World Energy Outlook 2015. International Energy Agency, Paris.Google Scholar
  33. Jean, S., Laborde, D., & Martin, W. (2011). Formulas and flexibility in trade negotiations: Sensitive agricultural products in the WTO’s Doha agenda. World Bank Economic Review, 24(3), 500–519.CrossRefGoogle Scholar
  34. Karacaovali, B., & Limão, N. (2008). The clash of liberalizations: preferential vs. multilateral trade liberalization in the European Union. Journal of International Economics, 74(2), 299–327.CrossRefGoogle Scholar
  35. Kee, H. L., Nicita, A., & Olarreaga, M. (2009). Estimating trade restrictiveness indices. The Economic Journal, 119(534), 172–199.CrossRefGoogle Scholar
  36. Krishna, P. (2012). Preferential trade agreements and the world trade system: A multilateralist view (NBER Working Paper 17840).Google Scholar
  37. Krugman, P. (1991a). The move toward free trade zones. Economic Review, Federal Reserve Bank of Kansas City, 76(6), 5–25.Google Scholar
  38. Krugman, P. (1991b). Is Bilateralism Bad? In E. Helpman & A. Razin (Eds.), International Trade and Trade Policy. Cambridge, MA: MIT Press.Google Scholar
  39. Limão, N. (2006). Preferential trade agreements as stumbling blocks for multilateral trade liberalization: evidence for the US. The American Economic Review, 96(3), 896–914.CrossRefGoogle Scholar
  40. Martin, W., & Ng, F. (2004). Regional trade and preferential trading agreements: A global perspective. In Global economic prospects. The World Bank.Google Scholar
  41. Mattoo, A., Ng, F., & Subramanian, A. (2011). The elephant in the ‘Green Room’: China and the Doha Round. In Policy Brief 11-3. Peterson Institute for International Economics.Google Scholar
  42. Narayanan, G. B., Aguiar, A., & McDougall, R. (2012). Global trade, assistance, and production: The GTAP 8 Data Base. West Lafayette: Center for Global Trade Analysis, Purdue University.Google Scholar
  43. Olarreaga, M., Nicita, A., & Silva, P. (2018). Cooperation in WTO’s tariff waters? Journal of Political Economy, 126(3), 1302–1338.CrossRefGoogle Scholar
  44. Subramanian, A., & Kessler, M. (2013) The hyperglobalization of trade and its future (Working Paper 13-06). Peterson Institute for International Economics.Google Scholar
  45. Summers, L. (1991). Regionalism and the world trading system. Economic Review, Federal Reserve Bank of Kansas City, 76(6), 295–302.Google Scholar
  46. Topalova, P., & Khandelwal, A. K. (2010). Trade liberalization and firm productivity: The case of India. The Review of Economics and Statistics, 93(3), 995–1009.CrossRefGoogle Scholar
  47. Van der Mensbrugghe, D. (2005). Linkage technical reference document: Version 6.0. Washington, D.C.: World Bank.Google Scholar
  48. WTO. (2008a). Revised draft modalities for agriculture. WTO, TN/AG/W/4/Rev.4.Google Scholar
  49. WTO. (2008b). Fourth Revision of draft modalities for non-agricultural market access. WTO, N/MA/W/103/Rev.3.Google Scholar
  50. WTO. (2011a). World trade report 2011. The WTO and preferential trade agreements: From co-existence to coherence. Geneva: WTO Publications.Google Scholar
  51. WTO (2011b). Trade policy review body—Nigeria. World Trade Organization, WT/TPR/S/247/Rev.1.Google Scholar

Copyright information

© Kiel Institute 2019

Authors and Affiliations

  1. 1.AgroParisTech and CEPII, AgroParisTech–INRA UMR Économie publiqueParis Cedex 05France
  2. 2.CEPIIParis Cedex 07France
  3. 3.CEPII and INRAParis Cedex 07France

Personalised recommendations