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Bilateral tariff rates in international trade : finished goods versus intermediate goods

  • Hayakawa, Kazunobu

In this paper, we examined back-and-forth international transactions through tariff reduction by estimating modified gravity equations for finished goods and intermediate goods separately. Our main findings are as follows. Exports of finished machinery products are negatively associated with not only the importer's tariff rates on finished machinery products but also the exporter's tariff rates on machinery parts. Similarly, exports of machinery parts are negatively associated with not only the importer's tariff rates on machinery parts but also the exporter's tariff rates on finished machinery products. These results imply that tariff reduction in only one production process in an industry has the potential to drastically change the magnitude of trade in the whole industry.

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Paper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 304.

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Date of creation: Apr 2011
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Publication status: Published in IDE Discussion Paper. No. 304. 2011.8
Handle: RePEc:jet:dpaper:dpaper304
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