Abstract
Since production and trade are increasingly organized within global value chains (GVCs), assessing who effectively pays the cost of protection is not straightforward and since productive processes are internationally fragmented, quantifying the effects of trade policy requires an enhanced analytical framework that takes international input–output linkages into account to assess the implications trade costs have on competitiveness at national and sector levels. This paper defines a new synthetic measure of trade protection based on the value added in trade, capturing the effects that the tariff structure has on exporting firms that rely on imported intermediate inputs. The index, defined in a general equilibrium framework, provides a theoretically sound protection measurement in the context of GVCs. We assess trade protection by computing protection indexes at the bilateral level on both gross imports and imports to exports using the Global Trade Analysis Project computable general equilibrium model. These indexes are used to investigate the relationship between the European Union tariffs and integration of the Italian GVCs. In the case of Italy, imports to exports are overall less protected than gross imports with significant differences at the sector level. Despite the low levels of nominal protection, industrial sectors play a central role in explaining our results. EU tariffs mostly affect Italian exporting firms in the case of chemical products, wearing apparel and leather products.
Highlights
The long European stagnation following the 2008–2009 global crisis has fuelled renewed debate about the importance of a strong industrial base to sustain and strengthen recovery and foster competitiveness
We extend the set of trade restrictiveness indexes proposed initially by Anderson and Neary (2005) to assess the effects of trade policies on global value chains (GVCs)-related trade and develop a measure of bilateral trade policy restrictiveness that captures the effects that the tariff structure has on exporting firms that rely on imported intermediate inputs
Antimiani et al (2018b), based on the theoretical framework posited by Anderson and Neary (2005), define in general equilibrium different benchmarks which can be used to measure restrictiveness, according to where the value added originates: the resulting Value Added Trade Restrictiveness Indexes are equivalent to the actual trade policies in terms of the impact on domestic or foreign value added embedded in imports
Summary
The long European stagnation following the 2008–2009 global crisis has fuelled renewed debate about the importance of a strong industrial base to sustain and strengthen recovery and foster competitiveness. We extend the set of trade restrictiveness indexes proposed initially by Anderson and Neary (2005) to assess the effects of trade policies on GVC-related trade and develop a measure of bilateral trade policy restrictiveness that captures the effects that the tariff structure has on exporting firms that rely on imported intermediate inputs We use these indexes to investigate how the protection granted by the European Union (EU) tariff structure to the Italian economy affects its integration in global supply networks. Global inter-country input–output (ICIO) tables, which put national accounts and bilateral trade data on goods and services into a consistent statistical framework, trace transactions in final and intermediate goods both within and between countries and allow (indirectly) trade to be measured in terms of VA content This metric allows all backward linkages between countries and sectors to be taken into account and captures the value of the imported inputs used directly and indirectly (at all stages of a country’s production) in the manufacturing of exported goods.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
