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WTO Tariff Commitments and Temporary Protection: Complements or Substitutes?

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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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    4. Atika Benaddi & Peri Silva, 2021. "Trade policy uncertainty: Evidence from the Arab League countries," Review of International Economics, Wiley Blackwell, vol. 29(5), pages 1327-1357, November.

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    Keywords

    GATT/WTO; Temporary Protection; Tariff Overhang;
    All these keywords.

    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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