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Unilateral tariff liberalisation

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  • Richard Baldwin

Abstract

Unilateral tariff liberalisation by developing nations is pervasive but our understanding of it is shallow. This paper strives to partly redress this lacuna on the theory side by introducing three novel political economy mechanisms with particular emphasis is on the role of production unbundling. One mechanism studies how lowering frictional barriers to imported parts can destroy the correlation of interests between parts producers and their downstream customers. A second mechanism studies how Kojima’s pro-trade FDI raises the political economy cost of maintaining high upstream barriers. The third works via a general equilibrium channel whereby developing country’s participation in the supply chains of advanced-nation industries undermines their own competitiveness in final goods, thus making final good protection more politically costly. In essence, developing nations’ pursuit of the export-processing industrialisation undermines their infant-industry industrialisation strategies.

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Bibliographic Info

Paper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd10-159.

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Date of creation: Jan 2011
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Handle: RePEc:hst:ghsdps:gd10-159

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Keywords: unilateral tariff liberalisation; race-to-the-bottom; political economy;

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References

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  1. Milner, Helen V. & Kubota, Keiko, 2005. "Why the Move to Free Trade? Democracy and Trade Policy in the Developing Countries," International Organization, Cambridge University Press, vol. 59(01), pages 107-143, January.
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Cited by:
  1. Maria Bas & Pamela Bombarda, 2013. "Chinese Trade Reforms, Market Access and Foreign Competition: the Patterns of French Exporters," Post-Print hal-00874946, HAL.

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