IDEAS home Printed from https://ideas.repec.org/p/wes/weswpa/2018-001.html
   My bibliography  Save this paper

WTO Tariff Commitments and Temporary Protection: Complements or Substitutes?

Author

Listed:
  • David J. Kuenzel

    (Economics Department, Wesleyan University)

Abstract

There is a long-held notion in the trade policy literature that traditional tariff instruments and temporary protection (TP) measures are substitutes. Despite this prediction, there is only mixed empirical evidence for a link between tariff reductions and the usage pattern of antidumping, safeguard and countervailing duties. Based on recent theoretical advances, I argue in this paper that the relevant trade policy margin for implementing TP measures is instead tariff overhangs, the difference between WTO bound and applied tariffs. Lower tariff overhangs constrain countries to raise their MFN applied rates without legal repercussions, independent of past tariff changes. Using detailed sectoral data for a sample of 30 WTO member countries during the period 1996-2014, I find strong evidence for an inverse link between tariff overhangs and TP activity. This result implies that tariff overhangs and TP measures are substitutes, vindicating the importance of existing tariff commitments as a key determinant of alternative protection instruments.

Suggested Citation

  • David J. Kuenzel, 2018. "WTO Tariff Commitments and Temporary Protection: Complements or Substitutes?," Wesleyan Economics Working Papers 2018-001, Wesleyan University, Department of Economics.
  • Handle: RePEc:wes:weswpa:2018-001
    as

    Download full text from publisher

    File URL: http://repec.wesleyan.edu/pdf/dkuenzel/2018001_kuenzel.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Michael O. Moore & Maurizio Zanardi, 2011. "Trade Liberalization and Antidumping: Is There a Substitution Effect?," Review of Development Economics, Wiley Blackwell, vol. 15(4), pages 601-619, November.
    2. Bown, Chad P. & Crowley, Meredith A., 2014. "Emerging economies, trade policy, and macroeconomic shocks," Journal of Development Economics, Elsevier, vol. 111(C), pages 261-273.
    3. Chad P. Bown & Meredith A. Crowley, 2013. "Self-Enforcing Trade Agreements: Evidence from Time-Varying Trade Policy," American Economic Review, American Economic Association, vol. 103(2), pages 1071-1090, April.
    4. Kuenzel, David J., 2017. "WTO dispute determinants," European Economic Review, Elsevier, vol. 91(C), pages 157-179.
    5. Robert M. Feinberg & Kara M. Reynolds, 2008. "Friendly Fire? The Impact of US Antidumping Enforcement on US Exporters," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 144(2), pages 366-378, July.
    6. Douglas A. Irwin, 2015. "Free Trade under Fire Fourth edition," Economics Books, Princeton University Press, edition 4, number 10486.
    7. Baldwin, Robert E., 1984. "Trade policies in developed countries," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.),Handbook of International Economics, edition 1, volume 1, chapter 12, pages 571-619, Elsevier.
    8. Bown, Chad P. & Tovar, Patricia, 2011. "Trade liberalization, antidumping, and safeguards: Evidence from India's tariff reform," Journal of Development Economics, Elsevier, vol. 96(1), pages 115-125, September.
    9. Kyle Bagwell & Robert W. Staiger, 2001. "Domestic Policies, National Sovereignty, and International Economic Institutions," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 519-562.
    10. Katz, Ethan, 2001. "Bias in Conditional and Unconditional Fixed Effects Logit Estimation," Political Analysis, Cambridge University Press, vol. 9(4), pages 379-384, January.
    11. Hungerford, Thomas L., 1991. "GATT: A cooperative equilibrium in a noncooperative trading regime?," Journal of International Economics, Elsevier, vol. 31(3-4), pages 357-369, November.
    12. Thomas Prusa & Susan Skeath, 2002. "The economic and strategic motives for antidumping filings," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 138(3), pages 389-413, September.
    13. Lake, James & Linask, Maia K., 2016. "Could tariffs be pro-cyclical?," Journal of International Economics, Elsevier, vol. 103(C), pages 124-146.
    14. de Sousa, José, 2012. "The currency union effect on trade is decreasing over time," Economics Letters, Elsevier, vol. 117(3), pages 917-920.
    15. Limão, Nuno & Tovar, Patricia, 2011. "Policy choice: Theory and evidence from commitment via international trade agreements," Journal of International Economics, Elsevier, vol. 85(2), pages 186-205.
    16. Russell Hillberry & Phillip McCalman, 2016. "Import dynamics and demands for protection," Canadian Journal of Economics, Canadian Economics Association, vol. 49(3), pages 1125-1152, August.
    17. Henrik Horn & Giovanni Maggi & Robert W. Staiger, 2010. "Trade Agreements as Endogenously Incomplete Contracts," American Economic Review, American Economic Association, vol. 100(1), pages 394-419, March.
    18. Chad P. Bown, 2008. "The Wto And Antidumping In Developing Countries," Economics and Politics, Wiley Blackwell, vol. 20(2), pages 255-288, June.
    19. Knetter, Michael M. & Prusa, Thomas J., 2003. "Macroeconomic factors and antidumping filings: evidence from four countries," Journal of International Economics, Elsevier, vol. 61(1), pages 1-17, October.
    20. Chrysostomos Tabakis & Maurizio Zanardi, 2017. "Antidumping Echoing," Economic Inquiry, Western Economic Association International, vol. 55(2), pages 655-681, April.
    21. Tobias D. Ketterer, 2016. "EU Anti-dumping and Tariff Cuts: Trade Policy Substitution?," The World Economy, Wiley Blackwell, vol. 39(5), pages 576-596, May.
    22. Bown, Chad P. & Crowley, Meredith A., 2013. "Import protection, business cycles, and exchange rates: Evidence from the Great Recession," Journal of International Economics, Elsevier, vol. 90(1), pages 50-64.
    23. Beshkar, Mostafa & Bond, Eric W. & Rho, Youngwoo, 2015. "Tariff binding and overhang: Theory and evidence," Journal of International Economics, Elsevier, vol. 97(1), pages 1-13.
    24. Simon P. Anderson & Nicolas Schmitt, 2000. "Non-Tariff Barriers and Trade Liberalization," CESifo Working Paper Series 254, CESifo.
    25. Simon P. Anderson & Nicolas Schmitt, 2003. "Nontariff Barriers and Trade Liberalization," Economic Inquiry, Western Economic Association International, vol. 41(1), pages 80-97, January.
    26. Alessandro Nicita & Marcelo Olarreaga & Peri Silva, 2018. "Cooperation in WTO’s Tariff Waters?," Journal of Political Economy, University of Chicago Press, vol. 126(3), pages 1302-1338.
    27. Michael O. Moore & Maurizio Zanardi, 2009. "Does antidumping use contribute to trade liberalization in developing countries?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(2), pages 469-495, May.
    28. Hansen, Wendy L., 1990. "The International Trade Commission and the Politics of Protectionism," American Political Science Review, Cambridge University Press, vol. 84(1), pages 21-46, March.
    29. Blonigen, Bruce A., 2006. "Working the system: Firm learning and the antidumping process," European Journal of Political Economy, Elsevier, vol. 22(3), pages 715-731, September.
    30. Robert M. Feinberg & Kara M. Reynolds, 2006. "The Spread of Antidumping Regimes and the Role of Retaliation in Filings," Southern Economic Journal, Southern Economic Association, vol. 72(4), pages 877-890, April.
    31. Brian R. Copeland, 1990. "Strategic Interaction among Nations: Negotiable and Non-negotiable Trade Barriers," Canadian Journal of Economics, Canadian Economics Association, vol. 23(1), pages 84-108, February.
    32. Zhihao Yu, 2000. "A model of substitution of non-tariff barriers for tariffs," Canadian Journal of Economics, Canadian Economics Association, vol. 33(4), pages 1069-1090, November.
    33. Gunnar Niels & Joseph Francois, 2006. "Business Cycles, the Exchange Rate, and Demand for Antidumping Protection in Mexico," Review of Development Economics, Wiley Blackwell, vol. 10(3), pages 388-399, August.
    34. Xiaohua Bao & Larry D. Qiu, 2011. "Is China's Antidumping More Retaliatory than that of the US?," Review of International Economics, Wiley Blackwell, vol. 19(2), pages 374-389, May.
    35. Beverelli, Cosimo & Boffa, Mauro & Keck, Alexander, 2014. "Trade policy substitution: Theory and evidence from Specific Trade Concerns," WTO Staff Working Papers ERSD-2014-18, World Trade Organization (WTO), Economic Research and Statistics Division.
    36. Chad P. Bown, 2011. "Taking Stock of Antidumping, Safeguards and Countervailing Duties, 1990–2009," The World Economy, Wiley Blackwell, vol. 34(12), pages 1955-1998, December.
    37. Busch, Marc L. & Pelc, Krzysztof J., 2014. "Law, politics, and the true cost of protectionism: the choice of trade remedies or binding overhang," World Trade Review, Cambridge University Press, vol. 13(1), pages 39-64, January.
    38. Kyle Bagwell & Robert W. Staiger, 2005. "Enforcement, Private Political Pressure, and the General Agreement on Tariffs and Trade/World Trade Organization Escape Clause," The Journal of Legal Studies, University of Chicago Press, vol. 34(2), pages 471-513, June.
    39. Bagwell, Kyle & Staiger, Robert W, 1990. "A Theory of Managed Trade," American Economic Review, American Economic Association, vol. 80(4), pages 779-795, September.
    40. Josh Ederington, 2001. "International Coordination of Trade and Domestic Policies," American Economic Review, American Economic Association, vol. 91(5), pages 1580-1593, December.
    41. Hoekman, Bernard M. & Kostecki, Michel M., 2009. "The Political Economy of the World Trading System," OUP Catalogue, Oxford University Press, edition 3, number 9780199553778.
    42. Feinberg, Robert M, 1989. "Exchange Rates and "Unfair Trade."," The Review of Economics and Statistics, MIT Press, vol. 71(4), pages 704-707, November.
    43. Finger, J M & Hall, H Keith & Nelson, Douglas R, 1982. "The Political Economy of Administered Protection," American Economic Review, American Economic Association, vol. 72(3), pages 452-466, June.
    44. William Greene, 2004. "The behaviour of the maximum likelihood estimator of limited dependent variable models in the presence of fixed effects," Econometrics Journal, Royal Economic Society, vol. 7(1), pages 98-119, June.
    45. Manuel Amador & Kyle Bagwell, 2013. "The Theory of Optimal Delegation With an Application to Tariff Caps," Econometrica, Econometric Society, vol. 81(4), pages 1541-1599, July.
    46. Kucik, Jeffrey & Reinhardt, Eric, 2008. "Does Flexibility Promote Cooperation? An Application to the Global Trade Regime," International Organization, Cambridge University Press, vol. 62(3), pages 477-505, July.
    47. Mostafa Beshkar & Eric W. Bond, 2017. "Cap and Escape in Trade Agreements," American Economic Journal: Microeconomics, American Economic Association, vol. 9(4), pages 171-202, November.
    48. Robert M. Feinberg & Seth Kaplan, 1993. "Fishing Downstream: The Political Economy of Effective Administered Protection," Canadian Journal of Economics, Canadian Economics Association, vol. 26(1), pages 150-158, February.
    49. Robert M. Feinberg & Kara M. Reynolds, 2007. "Tariff Liberalisation and Increased Administrative Protection: Is There a Quid Pro Quo?," The World Economy, Wiley Blackwell, vol. 30(6), pages 948-961, June.
    50. Hoekman, Bernard M. & Leidy, Michael P., 1992. "Cascading contingent protection," European Economic Review, Elsevier, vol. 36(4), pages 883-892, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gnutzmann-Mkrtchyan, Arevik & Henn, Christian, 2018. "Peeling away the layers: Impacts of durable tariff elimination," Journal of International Economics, Elsevier, vol. 115(C), pages 259-276.

    More about this item

    Keywords

    GATT/WTO; Temporary Protection; Tariff Overhang;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wes:weswpa:2018-001. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Manolis Kaparakis). General contact details of provider: http://edirc.repec.org/data/edwesus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.