Tariff Reductions Research Articles

TRADE LIBERALIZATION AND THE GREAT LABOR REALLOCATION

AbstractI examine how migration frictions shape the effects of trade policy by analyzing the impact of tariff reductions on labor allocation in China and the role of hukou‐based migration frictions. Trade liberalization induces significant labor reallocation, greater in regions with lower hukou frictions. Quantitatively, trade liberalization increases China's welfare by 0.72%. Abolishing the hukou system directly improves welfare by 1.75% but reduces gains from tariff reductions by 18% and amplifies negative distributional effects. In the process, I develop a novel measure of hukou‐related migration frictions.

The potential impact of environmental goods trade liberalization on trade and emissions

The potential impact of environmental goods trade liberalization on trade and emissions

Evaluating the ASEAN-India FTA: Implications for India's Black Pepper trade

The impact of the ASEAN-India Free Trade Agreement (AIFTA) on Indian black pepper was analysed using the SMART and gravity models. The reduction in tariff under AIFTA increased black pepper imports from the Association of Southeast Asian Nations (ASEAN) countries after 2000 and caused a trade creation effect of 19.36 lakh US$. This allowed Indian consumers to benefitted from low-priced black pepper imports from ASEAN countries. Indonesia and Vietnam collectively accounted for nearly 100% of the trade creation. The distance between India and ASEAN was found to have a negative effect on trade, whereas the GDP of the importing country positively influenced the likelyhood of trade between India and ASEAN countries. The main variable of interest was the AIFTA dummy, which captured the effects of trade creation and trade diversion resulting from the regional trade agreement. The estimated coefficient of the AIFTA dummy was positive and significant, indicating a trade creation effect among AIFTA member countries as a result of the agreement.

TRADE LIBERALIZATION, STRUCTURAL CHANGE AND PRODUCTIVITY GROWTH: EVIDENCE FROM MONGOLIA

We analyze how Mongolia's trade openness affects labor market structural changes and its contribution to manufacturing productivity growth. Our findings indicate that reducing import tariffs on intermediate goods resulted in a 1.70% shift of labor from state-owned enterprises (SOEs) to non-SOEs from 2001 to 2015, accounting for 2.96% of intra-industry labor flow. Intermediate import tariff reduction decreased costs for non-SOEs and alleviated financing constraints. Additionally, the shift in employment ownership due to trade openness improved resource allocation efficiency, explaining 3.51% of production efficiency growth from inter-enterprise factor allocation and 0.81%-1.12% of overall manufacturing productivity growth. This highlights its role as a key channel for enhancing productivity through trade openness.

Peran Trade Creation pada Produk dari China Terhadap Impor pakaian di Indonesia

International trade plays a strategic role in driving economic growth, especially for developing countries like Indonesia. Through trade activities, countries can access products with more economical prices or superior quality while expanding the market for their local products. One important concept in international trade is trade creation, which is an increase in the volume of trade between countries as a result of the reduction or elimination of tariff and non-tariff barriers. This concept allows goods produced more efficiently in other countries to be imported to replace more expensive or less efficient domestic products (Baier & Bergstrand, 2020). As a developing country, Indonesia is also active in international trade and has significant trade relations with China, particularly in the textile and apparel sector, where China has become the largest trading partner in recent years.

Growing beyond trade: Export shocks and the spatial expansions of bank branching

AbstractThis paper empirically examines the impact of tariff reductions for exporters on banks' location choices with geo‐referenced information on subsidiaries and branches of China's state‐owned and joint‐stock banks. We construct prefecture‐level tariff barrier changes faced by exporters from 2001 to 2007 and identify the impact by exploiting within‐bank cross‐prefecture changes in bank branching patterns. The empirical results suggest a positive and significant pass‐through from export expansion to banks' geographic expansion. Specifically, a 10% export tariff reduction would induce a 1.88% increase in the local number of bank branches. This result holds under a battery of robustness tests. Mechanism tests suggest that increased credit demand in the corporate sector, both at the intensive and extensive margins, is the main channels that explain the baseline patterns. The findings in this paper offer valuable insights into the relationship between internationalisation and financial development.

The effect of trade liberalization on marriage and fertility: evidence from Indian census

Abstract Using a district-level panel constructed from five waves of decennial Indian censuses covering 1971–2011, we examine the medium-term (1991–2001) and long-term (1991–2011) impacts of the 1991 Indian trade liberalization on marriage and fertility rates among young women aged 15–34. We exploit the fact that countrywide tariff reductions varied across industries creating exogenous local labor market shocks based on the initial employment composition of the district. We find heterogeneous results across urban and rural areas. We find that urban areas of the districts that experienced larger tariff cuts experienced relative increases in marriage rates compared to the districts that experienced smaller tariff cuts. Tariff cuts positively affect workforce participation among both young men and women in urban areas. However, there is no impact of tariff cuts on the marriage rate or workforce participation among young population (15–34) in rural areas. In contrast, tariff cuts reduced fertility rates mostly in rural areas.

Trade Liberalization and Mortality Rates: Evidence of Pro-Cyclical Mortality From Brazil.

We trace the evolution of all-cause mortality rates in Brazilian regions with varying exposure to trade-induced economic shocks before, during, and after liberalization reforms in the 1990s. We find consistent evidence of pro-cyclical mortality, with areas more exposed to tariff reductions experiencing larger declines in mortality across varying time horizons. The observed decline in mortality rates is evident across sex, age groups, and for both internal and external causes of mortality. We falsify the observed relationship between mortality and tariff reductions with analyses of causes of death that are plausibly unrelated to economic activity. Concerning proximate mechanisms involved in our finding of pro-cyclical mortality, we show that healthcare infrastructure expanded in local economies more affected by the trade-induced economic shock. This expansion was characterized by the increased capital-intensity of care, facilitated by the import of diagnostic technologies that reduce mortality from internal causes. We also find supporting evidence for the idea that pro-cyclical mortality is partially caused by a decrease in transport and non-transport-related accidents. Overall, our findings highlight an underappreciated dimension of trade policy effects, namely public health.

Stakeholder Analysis of Indonesia's Trade the Regional Comprehensive Economic Partnership (RCEP) Actor Non-ASEAN

This study examines Indonesia’s trade relations with non-ASEAN member countries under the Regional Comprehensive Economic Partnership (RCEP). The RCEP, signed in 2020, presents Indonesia with significant opportunities to expand market access, particularly with key partners like China, Japan, South Korea, Australia, and New Zealand. However, challenges persist, particularly in terms of trade imbalances and competitive pressures. The research employs a mixed-methods approach, combining quantitative data from trade flow statistics and tariff reductions with qualitative insights from interviews and focus group discussions with key stakeholders. The Importance Performance Analysis (IPA) method was applied to assess the effectiveness of RCEP provisions. Results show that while Indonesia benefits from improved market access, significant trade deficits remain, especially with China and Australia. Stakeholders, including government agencies and private sector exporters, play pivotal roles in mitigating these challenges by addressing non-tariff barriers and enhancing trade facilitation. In conclusion, Indonesia must strategically leverage the RCEP framework to address trade imbalances and improve export competitiveness. Policy recommendations include enhancing stakeholder collaboration, improving infrastructure, and increasing awareness among small and medium enterprises (SMEs) to fully utilize RCEP benefits. These efforts will ensure Indonesia remains competitive in global trade.

Tariff Negotiations Under Free Trade Agreements: The Case of Mongolia and the Republic of Korea

One of the principal reasons for the establishment of Free Trade Agreements (FTAs) between countries is to negotiate the reciprocal reduction and/or elimination of customs tariffs. According to Mongolian law, the Customs General Administration of Mongolia (CGAM) is responsible for determining the optimal rate and amounts of customs duties. As such, it plays a leading role in the negotiation of tariffs and the implementation of FTAs with partner countries. This paper examines the legal text of tariff negotiations and the modality of reducing tariffs, and determines specific goods of interest for tariff negotiations within the framework of the agreement between Mongolia and the Republic of Korea (ROK), based on analysis of the revealed comparative advantage (RCA) index. The results of the analysis show that, during the negotiation process, Mongolia should focus on textiles and apparel, as well as agricultural production, while the ROK should concentrate on automobiles, items of machinery and their parts, tobacco, cosmetics and noodles. This study should prove useful to Mongolian Customs experts and tariff negotiation team members, trade policy makers and domestic producers.

The Effects of the Regional Comprehensive Economic Partnership on China’s Trade, Tariff Revenue and Welfare

Increasing attention is being paid to the role of regional economic integration in facilitating a country's trade. This is especially true for the state like China, which has the second largest GDP in the world. This study explores the effects of the Regional Comprehensive Economic Partnership (RCEP) on China, looking at changes in welfare, trade creation, trade diversion, and tariff revenue under four tariff reduction scenarios with RCEP members. The study evaluates how RCEP affects China's trade relations with Japan, Korea, ASEAN, Australia, and New Zealand by using the World Bank's World Integrated Trade Solution Software for Market Analysis and Restrictions on Trade (WITS-SMART) tool. The findings demonstrate increased market accessibility and competitiveness of commodities in the Chinese market, with notable increases in trade creation and diversion, especially with Korea and Japan. RCEP considerably increases welfare even though it results in lower tariff revenues, indicating that the advantages of lower trade costs and more effective supply chains exceed the fiscal drawbacks. The paper concludes with policy recommendations that emphasize the need for strategic adaptations in China’s trade policies to fully capitalize on the economic opportunities presented by RCEP, ensuring sustainable growth and the equitable distribution of trade benefits among all member states.

Trade liberalization and labor monopsony: Evidence from Chinese firms

Trade liberalization and labor monopsony: Evidence from Chinese firms

Investigating the Influence of Social Media on Youth Engagement in the August 2024 #EndBadGovernance Protests in Nigeria

Social media has emerged as a significant platform for political, economic, and social dialogue worldwide, acting as a vehicle for self-expression and a means to hold political leaders accountable. In Nigeria, platforms such as Facebook, X, WhatsApp, and Instagram have played a crucial role in the organisation and mobilisation of protests. This study explores the impact of social media on youth participation in the August 2024 #EndBadGovernance protests in Nigeria. Using the public sphere theory, the research adopted a quantitative survey approach, collecting data from 300 respondents across the six Area Councils of the Federal Capital Territory, Abuja. The results reveal that social media was instrumental in mobilising and engaging young people during the protests. Prominent themes discussed on social media included the high cost of living, reversal of the fuel subsidy removal, investigation of the fuel subsidy regime, reduction in electricity tariffs, high cost of governance, corruption, deficiencies in educational and healthcare systems, unemployment, insecurity, and widespread poverty. This study highlights social media's dual function as both a catalyst for mobilisation and a tool for organisational coordination. It is recommended that public training on the responsible use of social media be implemented to maximise its effectiveness in civic engagement.

A Prospective Study on the Economic Effects of China-GCC FTA - Simulation and Analyses Based on GTAP Model

In the context of the "Belt and Road" initiative, this paper is based on the China-GCC FTA negotiations, and uses the Global Trade Analysis Model (GTAP) to construct six scenarios of tariff reduction in key sectors and reduction of technical barriers to trade (TBT) between China and the GCC countries, and to assess the impacts of the construction of the FTA on the economies of China and related countries. The paper shows that increased trade liberalization has a positive economic impact on the China-GCC FTA. At the same time, tariff changes in the manufacturing and oil and gas industries dominated the tariff reductions, but the reduction of technical barriers to trade (TBT) has a particularly significant impact compared to tariffs. Bilateral trade will contribute more remarkably to China's continued economic growth than in the GCC countries. Reductions in trade barriers will effectively boost production demand in Chinese and GCC countries, contributing imports, exports and output, which will benefit both economies, specially, China's trade surpluses increasing particularly in various sectors.

Policy design for renewable energy development based on government support: A system dynamics model

Policy design for renewable energy development based on government support: A system dynamics model

Trade liberalization, labor market power, and misallocation across firms: Evidence from China's WTO accession

Trade liberalization, labor market power, and misallocation across firms: Evidence from China's WTO accession

Organizational Hierarchies and Export Destinations

Abstract This paper proposes a new link relating export destinations and the organization of the firm: the production of higher-quality varieties exported to rich destinations induces firms to restructure their production processes, becoming organizationally more complex. A theoretical model with these features is presented and then the mechanisms are explored using a panel of Chilean manufacturing plants. The identification strategy of the paper relies on falling tariffs on Chilean products across destinations caused by the signature of Free Trade Agreements with high-income countries (the European Union, the United States, and South Korea). Results show that Chilean plants that were induced by these tariff reductions to start exporting to high-income destinations increased the number of hierarchical layers and upgraded the quality of their products. This involved the addition of qualified supervisors that facilitated the provision of higher product quality. These effects took place at new high-income exporting firms.

The impact of the Indonesia–OIC countries’ free trade agreement on the halal food sector: CGE analysis

PurposeThis study aims to analyse the potential impacts of free trade agreement (FTA) between Indonesia and Organisation of Islamic Cooperation (OIC) countries by eliminating import tariffs in the halal food sector on welfare, gross domestic product (GDP) and trade balance. OIC countries as the second-largest organisation after the United Nations are the potential markets for the halal food industry.Design/methodology/approachThis study used the Global Trade Analysis Project database version 10 by adopting a computable general equilibrium (CGE) model for two scenarios. The first scenario stated that Indonesia should conduct an FTA with ten potential OIC countries as export destination, while the second one stated that it should be conducted with all OIC countries.FindingsIndonesia is predicted to get the highest increase in welfare by making an FTA with all OIC countries. Scenario 2 showed that Indonesia had much higher changes in real GDP with a positive change of 0.0018%. Even though it is projected to experience a surplus in the trade balance in both scenarios, Indonesia is predicted to experience a decline in exports for the particular halal food sector. The findings contribute some new insights to the existing literature, revealing an alignment between economic integration and the concept of international trade in Islam.Research limitations/implicationsThe limitation of this study is the available data that cannot describe the population of all OIC countries. Only 31 countries out of a total of 56 OIC countries can be used in research. The scope of research is limited to analysing FTAs between Indonesia and OIC countries in the form of abolishing import tariffs and does not include non-tariff barrier issues such as halal certification.Practical implicationsThe preferential trade agreement is considered relevant as Indonesia’s initial commitment to conduct a bilateral trade with ten selected OIC countries. The Indonesia Government, however, still needs to make several mitigation efforts in various sectors experiencing losses as a result of economic integration, such as by creating a more conducive business climate, supporting the sources of capital, facilitating bureaucratic affairs, as well as providing tax incentives.Originality/valueThis paper contributes to the literature by focusing on the critical aspects of the FTA’s impacts on halal food sectors by optimizing the reduction of import tariffs of OIC countries. Different from previous studies, this study applied a static CGE model to examine the impacts of FTA on macroeconomic indicators.

Long-term effect of trade liberalization on human capital: evidence from Chinese students

ABSTRACT This study examines the long-term effects of trade liberalization on human capital accumulation for students, specifically through schooling decisions. To establish this linkage, I leverage the significant reduction in trade tariffs following China’s WTO accession in 2001 as an identification strategy and construct the shift-share instrument variable for each Chinese prefecture’s exposure to trade shock. Utilizing cognitive test scores from the China Family Panel Studies (CFPS) dataset for cohorts aged between 13 to 20 at the time of trade liberalization, I find that the trade shock leads to a decline in cognitive test scores approximately 15 years later. Furthermore, combining CFPS data with the China Population Census, I demonstrate that export expansion has resulted in a reduction in university enrollment and less education years among youth.

The price of capital goods, investment and labour: Micro‐evidence from a trade liberalization

AbstractIn this paper, we show that a reduction in capital goods prices induced by trade policies can stimulate both investment and labour. We exploit a quasi‐natural experiment in the form of a trade reform in Colombia to study how firms with differential exposure to reductions in capital goods tariffs react in terms of their investment and labour decision. Firms that see a larger decline in the input tariff for capital goods increase investment and labour for production, as well as their labour share. Reductions in input tariffs are passed through to input prices for all goods. However, only lower prices for capital, not for other goods, translate into more investment and employment of production workers.