Trade policy analysis in the presence of duty drawbacks
Duty drawback schemes, which typically involve a combination of duty rebates and exemptions, are a feature of many countries' trade regimes. They are used in highly protected, developing economies as means of providing exporters with imported inputs at world prices, and thus increasing their competitiveness, while maintaining the protection on the rest of the economy. In China duty exemptions have been central to the process of trade reform and have led to a tremendous increase in processed exports utilizing imported materials. Despite the widespread use and importance of duty drawbacks, these "new trade liberalization" instruments have been given relatively little attention in empirical multilateral trade liberalization studies. This paper presents an empirical multi-region trade model GTAP-DD, an extension of GTAP, in which the effects of policy reform are differentiated based on the trade-orientation of the firms. Both GTAP and GTAP-DD are used to analyze the impact of China's WTO accession, which involves liberalization in China from 1997 to post-accession tariffs among a number of other liberalization measures. The analysis shows that failure to account of duty exemptions in the case of China's recent WTO accession will overstate the increase in : (a) China's trade flows by 40 percent, (b) China's welfare by 15 percent, and (c) exports of selected sectors by as much as 90 percent. The magnitude of the bias depends on the level of pre-intervention tariffs and the size of tariff cuts - the larger the initial distortions and tariff reductions, the larger the bias when duty drawbacks are ignored. The bias in GTAP's estimates of China's real GDP, trade flows and welfare changes due to WTO accession increases more three times when China's pre-intervention tariffs are raised from their 1997 levels to the much higher 1995 levels. These results suggest that trade liberalization studies focusing on economies in which protection is high, import concessions play
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ianchovichina, Elena & Martin, Will, 2001.
"Trade liberalization in China's accession to the World Trade Organization,"
Policy Research Working Paper Series
2623, The World Bank.
- Hertel, Thomas W. & Terrie Walmsley, 2000.
"China's Accession to the WTO: Timing is Everything,"
GTAP Working Papers
403, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
- Terrie L. Walmsley & Thomas W. Hertel, 2001. "China's Accession to the WTO: Timing is Everything," The World Economy, Wiley Blackwell, vol. 24(8), pages 1019-1049, 09.
- Olivier Cadot & Jaime de Melo & Marcelo Olarreaga, 2015.
"The Protectionist Bias of Duty Drawbacks: Evidence from Mercosur,"
World Scientific Book Chapters,
in: Developing Countries in the World Economy, chapter 15, pages 359-380
World Scientific Publishing Co. Pte. Ltd..
- Cadot, Olivier & de Melo, Jaime & Olarreaga, Marcelo, 2003. "The protectionist bias of duty drawbacks: evidence from Mercosur," Journal of International Economics, Elsevier, vol. 59(1), pages 161-182, January.
- Panagariya, Arvind, 1992. "Input tariffs, duty drawbacks, and tariff reforms," Journal of International Economics, Elsevier, vol. 32(1-2), pages 131-147, February.
- Malcolm, Gerard, 1998. "Adjusting Tax Rates in the GTAP Data Base," GTAP Technical Papers 315, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
- Gruen, Nicholas, 1999. "Towards a More General Approach to Trade Liberalization," The Economic Record, The Economic Society of Australia, vol. 75(231), pages 385-96, December.
- W. Jill Harrison & K.R. Pearson, 1994.
"Computing Solutions for Large General Equilibrium Models Using GEMPACK,"
Centre of Policy Studies/IMPACT Centre Working Papers
ip-64, Victoria University, Centre of Policy Studies/IMPACT Centre.
- Harrison, W Jill & Pearson, K R, 1996. "Computing Solutions for Large General Equilibrium Models Using GEMPACK," Computational Economics, Society for Computational Economics, vol. 9(2), pages 83-127, May.
- Ianchovichina, Elena, 2004.
"Trade policy analysis in the presence of duty drawbacks,"
Journal of Policy Modeling,
Elsevier, vol. 26(3), pages 353-371, April.
- Ianchovichina, Elena, 2003. "GTAP-DD: A Model for Analyzing Trade Reforms in the Presence of Duty Drawbacks," GTAP Technical Papers 1192, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
- Ianchovichina, Elena, 2002. "Trade policy analysis in the presence of duty drawbacks," Policy Research Working Paper Series 3312, The World Bank.
- Ianchovichina, Elena & Martin, William, 2003.
"Economic impacts of China's accession to the World Trade Organization,"
Policy Research Working Paper Series
3053, The World Bank.
- Elena Ianchovichina & Will Martin, 2004. "Impacts of China's Accession to the World Trade Organization," World Bank Economic Review, World Bank Group, vol. 18(1), pages 3-27.
- Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, March.
When requesting a correction, please mention this item's handle: RePEc:eee:jpolmo:v:26:y:2004:i:3:p:353-371. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.