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Unilateral tariff liberalisation

  • Richard Baldwin

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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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
Date of revision:
Handle: RePEc:hst:ghsdps:gd10-159
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  1. Richard E. Baldwin & Frédéric Robert-Nicoud, 2007. "Protection for sale made easy," LSE Research Online Documents on Economics 19713, London School of Economics and Political Science, LSE Library.
  2. Antoni Estevadeordal & Caroline Freund & Emanuel Ornelas, 2008. "Does Regionalism Affect Trade Liberalization toward NonMembers?," The Quarterly Journal of Economics, MIT Press, vol. 123(4), pages 1531-1575, November.
  3. Baldwin, Richard E., 2007. "Managing the Noodle Bowl: The Fragility of East Asian Regionalism," Working Papers on Regional Economic Integration 7, Asian Development Bank.
  4. Venables, Anthony J., 1985. "Trade and trade policy with imperfect competition: The case of identical products and free entry," Journal of International Economics, Elsevier, vol. 19(1-2), pages 1-19, August.
  5. 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.
  6. Richard E. Baldwin & Frédéric Robert-Nicoud, 2008. "A Simple Model of the Juggernaut Effect of Trade Liberalisation," CEP Discussion Papers dp0845, Centre for Economic Performance, LSE.
  7. Richardson, Martin, 1993. "Endogenous protection and trade diversion," Journal of International Economics, Elsevier, vol. 34(3-4), pages 309-324, May.
  8. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
  9. Marco Fugazza & Frédéric Robert-Nicoud, 2014. "The “Emulator Effect” of the Uruguay Round on US Regionalism," Review of International Economics, Wiley Blackwell, vol. 22(5), pages 1049-1078, November.
  10. Pravin Krishna & Devashish Mitra, 2004. "Reciprocated Unilateralism in Trade Reforms with Majority Voting," NBER Working Papers 10826, National Bureau of Economic Research, Inc.
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  12. Martin, Philippe & Rogers, Carol Ann, 1994. "Industrial Location and Public Infrastructure," CEPR Discussion Papers 909, C.E.P.R. Discussion Papers.
  13. Richard E. Baldwin & Frederic Robert-Nicoud, 2002. "Entry and Asymmetric Lobbying: Why Governments Pick Losers," NBER Working Papers 8756, National Bureau of Economic Research, Inc.
  14. Emanuel Ornelas, 2005. "Rent Destruction and the Political Viability of Free Trade Agreements," The Quarterly Journal of Economics, MIT Press, vol. 120(4), pages 1475-1506, November.
  15. Gene M. Grossman & Elhanan Helpman, 1993. "Trade Wars and Trade Talks," NBER Working Papers 4280, National Bureau of Economic Research, Inc.
  16. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
  17. Hector Calvo-Pardo & Caroline Freund & Emanuel Ornelas, 2009. "The ASEAN Free Trade Agreement: Impact on Trade Flows and External Trade Barriers," CEP Discussion Papers dp0930, Centre for Economic Performance, LSE.
  18. Pierre-Louis Vézina, 2014. "Race-to-the-bottom Tariff Cutting," Review of International Economics, Wiley Blackwell, vol. 22(3), pages 444-458, 08.
  19. Hummels, David, 1999. "Toward a Geography of Trade Costs," GTAP Working Papers 1162, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  20. Coates, Daniel E. & Ludema, Rodney D., 2001. "A theory of trade policy leadership," Journal of Development Economics, Elsevier, vol. 65(1), pages 1-29, June.
  21. Paola Conconi & Carlo Perroni, 2012. "Conditional versus Unconditional Trade Concessions for Developing Countries," ULB Institutional Repository 2013/98541, ULB -- Universite Libre de Bruxelles.
  22. Baldwin, Richard & Venables, Anthony J., 2013. "Spiders and snakes: Offshoring and agglomeration in the global economy," Journal of International Economics, Elsevier, vol. 90(2), pages 245-254.
  23. Ornelas, Emanuel, 2005. "Trade creating free trade areas and the undermining of multilateralism," European Economic Review, Elsevier, vol. 49(7), pages 1717-1735, October.
  24. Kimura, Fukunari & Takahashi, Yuya & Hayakawa, Kazunobu, 2007. "Fragmentation and parts and components trade: Comparison between East Asia and Europe," The North American Journal of Economics and Finance, Elsevier, vol. 18(1), pages 23-40, February.
  25. Jun Ishii & Kei-Mu Yi, 1997. "The growth of world trade," Research Paper 9718, Federal Reserve Bank of New York.
  26. L. Alan Winters & Shahid Yusuf, 2007. "Dancing with the Giants: China, India, and the Global Economy," World Bank Publications, The World Bank, number 6632.
  27. Ludema, Rodney D & Mayda, Anna Maria & Mishra, Prachi, 2010. "Protection for Free? The Political Economy of U.S. Tariff Suspensions," CEPR Discussion Papers 7926, C.E.P.R. Discussion Papers.
  28. Baldwin, Richard E. & Venables, Anthony J., 1995. "Regional economic integration," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 31, pages 1597-1644 Elsevier.
  29. Wilfred J. Ethier, 2002. "Unilateralism in a Multilateral World," Economic Journal, Royal Economic Society, vol. 112(479), pages 266-292, April.
  30. Andrea Ariu & Giordano Mion, 2010. "Trade in services : IT and task content," Working Paper Research 200, National Bank of Belgium.
  31. Mitsuyo Ando & Fukinari Kimura, 2003. "The Formation of International Production and Distribution Networks in East Asia," NBER Working Papers 10167, National Bureau of Economic Research, Inc.
  32. Baldwin, Robert Edward & Baldwin, Richard Edward, 1996. "Alternate approaches to the political economy of endogenous trade liberalization," European Economic Review, Elsevier, vol. 40(3-5), pages 775-782, April.
  33. 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.
  34. Olivier Cadot & Jaime de Melo & Marcelo Olarreaga, 2004. "Lobbying, Counterlobbying, and the Structure of Tariff Protection in Poor and Rich Countries," World Bank Economic Review, World Bank Group, vol. 18(3), pages 345-366.
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