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How did China's WTO entry affect U.S. prices?

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  • Amiti, Mary
  • Dai, Mi
  • Feenstra, Robert C.
  • Romalis, John

Abstract

We analyze the effects of China's rapid export expansion following its WTO entry on the U.S. prices of manufacturing goods between 2000 and 2006, exploiting cross-industry variation in trade liberalization. Lower input tariffs in China lowered costs and, in conjunction with reduced U.S. tariff uncertainty, expanded China's export participation. WTO entry therefore led to lower effective prices for Chinese exports, and we find a substantial reduction in the prices of other countries selling to the U.S., too. The largest contribution to the overall price reduction comes from lower inputs tariffs in China, with further price reductions caused by the reduction in tariff uncertainty. Other policy reforms such as the elimination of U.S. quotas under the Multifibre Agreements and of Chinese export controls also reduced prices.

Suggested Citation

  • Amiti, Mary & Dai, Mi & Feenstra, Robert C. & Romalis, John, 2020. "How did China's WTO entry affect U.S. prices?," Journal of International Economics, Elsevier, vol. 126(C).
  • Handle: RePEc:eee:inecon:v:126:y:2020:i:c:s0022199620300556
    DOI: 10.1016/j.jinteco.2020.103339
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    1. Dmitri Kirpichev & Enrique Moral-Benito, 2018. "The costs of trade protectionism: evidence from Spanish firms and non-tariff measures," Working Papers 1814, Banco de España.
    2. Lorenzo Trimarchi, 2020. "Trade Policy and the China Syndrome," Working Papers ECARES 2020-15, ULB -- Universite Libre de Bruxelles.
    3. Robert C. Feenstra & Akira Sasahara, 2018. "The ‘China shock,’ exports and U.S. employment: A global input–output analysis," Review of International Economics, Wiley Blackwell, vol. 26(5), pages 1053-1083, November.
    4. Liang Bai & Sebastian Stumpner, 2019. "Estimating US Consumer Gains from Chinese Imports," American Economic Review: Insights, American Economic Association, vol. 1(2), pages 209-224, September.
    5. Chen, Tao & Gao, Huasheng & Wang, Yuxi, 2021. "Tariff uncertainty and firm innovation: Evidence from the U.S.–China Permanent Normal Trade Relation," Journal of Empirical Finance, Elsevier, vol. 62(C), pages 12-27.

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    More about this item

    Keywords

    Trade liberalization; Input tariffs; China exports; Variety;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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