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How Did China's WTO Entry Benefit U.S. Consumers?

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

Abstract

China's rapid rise in the global economy following its 2001 WTO entry has raised questions about its economic impact on the rest of the world. In this paper, we focus on the U.S. market and potential consumer benefits. We find that the China trade shock reduced the U.S. manufacturing price index by 7.6 percent between 2000 and 2006. In principle, this consumer welfare gain could be driven by two distinct policy changes that occurred with WTO entry. The first, which has received much attention in the literature, is the U.S. granting permanent normal trade relations (PNTR) to China, effectively removing the threat of China facing very high tariffs on its exports to the U.S. A second, new channel we identify is China reducing its own input tariffs. Our results show that China's lower input tariffs increased its imported inputs, boosting Chinese firms' productivity and their export values and varieties. Lower input tariffs also reduced Chinese export prices to the U.S. market. In contrast, PNTR had no effect on Chinese productivity nor export prices, but did increase Chinese entry into the U.S. export market. We find that at least two-thirds of the China WTO effect on the U.S. price index of manufactured goods was through China lowering its own tariffs on intermediate inputs.

Suggested Citation

  • Amiti, Mary & Dai, Mi & Feenstra, Robert & Romalis, John, 2017. "How Did China's WTO Entry Benefit U.S. Consumers?," CEPR Discussion Papers 12076, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12076
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    Cited by:

    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;Working Papers Homepage.
    2. Robert C. Feenstra & Akira Sasahara, 2017. "The ‘China Shock’, Exports and U.S. Employment: A Global Input-Output Analysis," NBER Working Papers 24022, National Bureau of Economic Research, Inc.
    3. Juan Carluccio & Erwan Gautier & Sophie Guilloux-Nefussi, 2018. "Dissecting the Impact of Imports from Low-Wage Countries on French Consumer Prices," Working papers 672, Banque de France.

    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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