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WTO Tariff Commitments and Temporary Protection: Complements or Substitutes?

Author

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  • 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
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    References listed on IDEAS

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    1. Kuenzel, David J., 2017. "WTO dispute determinants," European Economic Review, Elsevier, vol. 91(C), pages 157-179.
    2. 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.
    3. Michael O. Moore & Maurizio Zanardi, 2009. "Does antidumping use contribute to trade liberalization in developing countries?," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 469-495, May.
    4. 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.
    5. 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.
    6. Douglas A. Irwin, 2015. "Free Trade under Fire Fourth edition," Economics Books, Princeton University Press, edition 4, number 10486, June.
    7. Katz, Ethan, 2001. "Bias in Conditional and Unconditional Fixed Effects Logit Estimation," Political Analysis, Cambridge University Press, vol. 9(04), pages 379-384, January.
    8. 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.
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    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

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