Does China’s market opening eased its trade partners’ domestic conflicts? – Evidence from China’s WTO accession

Abstract

Taking the event of China’s accession to WTO at the end of 2001 as an exogenous shock, using the “China Import Tariff database” from 1997 to 2007 and the “Uppsala Conflict database”, this study empirically investigates the impact of China’s import market opening on trade partners’ domestic conflicts by using the difference-in-difference (DID) method. The study results show that after China’s accession to WTO, the deeper market opening significantly reduces the trade partners’ domestic conflicts. The results of the robustness analysis using different estimation methods such as two-period estimation, replacement of explanatory variables, bilateral tailing, and sample exclusion continue to support the conclusion. The mechanism test shows that the import market opening brought about by China’s WTO accession reduces trade partners’ domestic conflicts by raising their employment level and improving income inequality. The heterogeneity test shows that China’s market opening has a greater mitigating effect on the domestic conflicts of least-developed countries, landlocked countries, African countries, and countries with poor institutional quality.