Does tariff escalation affect export shares: The case of cotton and coffee in global trade
Many studies show that Tariff Escalation (TE) lowers export shares in many of the processing sectors, given their higher level of protection. However, there are instances when the export shares of processed sectors are higher despite the existence of TE. We examine both these contrasting cases of TE in this paper. On the one hand, there is TE in coffee and coffee products in developing countries, which lead in raw coffee exports and lag in roasted coffee exports. On the other hand, there is a similar pattern of TE in developing countries, which are leading exporters of cotton textiles, but not as much of raw cotton. This raises the question whether TE has a systematic impact on a country’s export shares. We use a widely used economy-wide model named GTAP (Global Trade Analysis Project) and its accompanying Data Base 2004 version. We supplement the data with UN commodity statistics and other country-specific and industry-specific sources to split cotton, cotton textiles, coffee and coffee products from aggregated sectors in this dataset. We analyze different policy scenarios of bringing the tariffs for processing sectors to the levels of their raw materials for the value-chains of cotton and coffee. Our results focusing on export shares show that TE can lead to higher or lower export shares depending on various other factors such as the actual tariff differences across sectors and countries.
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- Cororaton, Caesar B. & Salam, Abdul & Altaf, Zafar & Orden, David & Dewina, Reno & Minot, Nicholas & Nazli, Hina, 2008. "Cotton-Textile-Apparel sectors of Pakistan: Situations and challenges faced," IFPRI discussion papers 800, International Food Policy Research Institute (IFPRI).
- Bedi, Jatinder S. & Cororaton, Caesar B., 2008. "Cotton-textile-apparel sectors of India:," IFPRI discussion papers 801, International Food Policy Research Institute (IFPRI).
- MacDonald, Stephen & Pan, Suwen & Somwaru, Agapi & Tuan, Francis C., 2004. "China'S Role In World Cotton And Textile Markets," 2004 Annual meeting, August 1-4, Denver, CO 20054, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Yeats, Alexander J., 1984. "On the analysis of tariff escalation : Is there a methodological bias against the interest of developing countries?," Journal of Development Economics, Elsevier, vol. 15(1-3), pages 77-88.
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