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The Influence of Chinese Trade Policy on Automobile Assembly and Parts

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  • Deborah L. Swenson

Abstract

This paper analyzes the economic effects of content-based import tariffs China imposed on imported auto parts. While China's policy penalized any firm that assembled cars with less than 60% Chinese content, the policy was most likely to affect foreign-affiliated firms who were more likely to exceed the content ceiling. To assess whether foreign-affiliated firms differentially changed their input sourcing this paper uses Chinese product trade data for 1997--2009 which report trade transactions by firm ownership type. Compared with import transactions for other firms, the data show that foreign-affiliated firms appear to have mitigated the effects of the policy by reducing import transaction prices, and by reducing their import quantities on the extensive margin. While China's content-based auto import trade policy was repealed in 2009 after China lost its dispute case at the WTO, the extraordinary growth in China's global export of auto parts since 2005 suggests that China's short term trade policy may have contributed to enduring effects in global supply chains. (JEL codes: F1 and F2) Copyright The Author 2012. Published by Oxford University Press on behalf of Ifo Institute, Munich. All rights reserved. For permissions, please email: journals.permissions@oup.com, Oxford University Press.

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Article provided by CESifo in its journal CESifo Economic Studies.

Volume (Year): 58 (2012)
Issue (Month): 4 (December)
Pages: 703-730

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Handle: RePEc:oup:cesifo:v:58:y:2012:i:4:p:703-730

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  1. Robert C. Feenstra, 1997. "Introduction to "The Effects of U.S. Trade Protection and Promotion Policies"," NBER Chapters, in: The Effects of U.S. Trade Protection and Promotion Policies, pages 1-7 National Bureau of Economic Research, Inc.
  2. Taiju Kitano & Hiroshi Ohashi, 2009. "Did US Safeguards Resuscitate Harley-Davidson in the 1980s?," CIRJE F-Series CIRJE-F-612, CIRJE, Faculty of Economics, University of Tokyo.
  3. Bruce A. Blonigen, 1999. "In Search of Substitution Between Foreign Production and Exports," NBER Working Papers 7154, National Bureau of Economic Research, Inc.
  4. Weinert, Jonathan & Ogden, Joan & Sperling, Dan & Burke, Andrew, 2008. "The future of electric two-wheelers and electric vehicles in China," Energy Policy, Elsevier, vol. 36(7), pages 2544-2555, July.
  5. Raymond Fisman & Peter Moustakerski & Shang-Jin Wei, 2007. "Outsourcing Tariff Evasion: A New Explanation for Entrepot Trade," NBER Working Papers 12818, National Bureau of Economic Research, Inc.
  6. Lopez-de-Silanes, Florencio & Markusen, James R. & Rutherford, Thomas F., 1996. "Trade policy subtleties with multinational firms," European Economic Review, Elsevier, vol. 40(8), pages 1605-1627, November.
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Cited by:
  1. Jesse Mora & Nirvikar Singh, 2013. "Trade productivity upgrading, trade fragmentation, and FDI in manufacturing: The Asian development experience," Indian Growth and Development Review, Emerald Group Publishing, vol. 6(1), pages 61-87, March.

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