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Unilateral Tariff Liberalisation

Listed author(s):
  • 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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File URL: http://www.nber.org/papers/w16600.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16600.

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Date of creation: Dec 2010
Publication status: published as “Unilateral tariff liberalisation”, in The International Economy , Journal of The Japan Society of. International Economics, No.14, pp 10-43. 2010. Also NBER WP No. 16600, 2010.
Handle: RePEc:nbr:nberwo:16600
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  17. Andrea Ariu & Giordano Mion, 2010. "Trade in services : IT and task content," Working Paper Research 200, National Bank of Belgium.
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  19. Martin, Philippe & Rogers, Carol Ann, 1995. "Industrial location and public infrastructure," Journal of International Economics, Elsevier, vol. 39(3-4), pages 335-351, November.
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  25. 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.
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  28. Ornelas, Emanuel, 2005. "Trade creating free trade areas and the undermining of multilateralism," European Economic Review, Elsevier, vol. 49(7), pages 1717-1735, October.
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  30. 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.
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  32. L. Alan Winters & Shahid Yusuf, 2007. "Dancing with the Giants: China, India, and the Global Economy," World Bank Publications, The World Bank, number 6632.
  33. Wilfred J. Ethier, 2002. "Unilateralism in a Multilateral World," Economic Journal, Royal Economic Society, vol. 112(479), pages 266-292, April.
  34. Jun Ishii & Kei-Mu Yi, 1997. "The growth of world trade," Research Paper 9718, Federal Reserve Bank of New York.
  35. 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.
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