The Empirical Landscape of Trade Policy

Transcription

1 The Empirical Landscape of Trade Policy Chad P. Bown and Meredith A. Crowley World Bank & CEPR and Cambridge May 2015 CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

2 What do we know about trade policy in the 21st Century? Three broad themes 1. Heterogeneity in the form and restrictiveness of border barriers across countries and industrial sectors. 2. History repeats itself Border restrictions on imports target the same class of problem (macroeconomic difficulty, adjustment to entry of new countries, etc.) or the same industries. 3. Local preferences over domestic policy sometimes clash with commitments to free/freer trade. Substitution of domestic policy measures for border barriers to restrict trade versus the optimal choice of local policies to satisfy local preferences. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

3 Outline of our chapter Document the extensive heterogeneity in ad valorem import tariffs. Applied MFN rates across countries and products (cross-sectional). WTO tariff binding rates across countries and products(cross-sectional). Inter-temporal variation in applied rates on products. Cross-sectional variation due to Preferential Trade Agreements. Document the usage of other border barriers. Specific tariffs. Temporary tariff barriers (antidumping, safeguards, etc). Quotas (quotas, price undertakings, VERs). Describe the challenges that behind the border (domestic) policies pose to the world trading system. Case study discussions of policy conflicts (domestic subsidies, consumer policies, supply-side policies). CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

4 Empirical Literature using MFN tariffs Absence of the WTO - i.e., optimal tariffs: Broda, Limão and Weinstein (2008) Impact of GATT/WTO accession negotiations or multilateral rounds: Bagwell and Staiger (2011), Ludema and Mayda (2013) Impact of preceding preferential liberalization: Limão (2006, 2007), Karacaovali and Limão (2008), Estevaderordal, Freund and Ornelas (2008) Impact of real exchange rates, business cycles, and other aggregate-level shocks: Irwin (2012), for the Great Recession, see Kee, Neagu and Nicita (2013), Rose (2013), Gawande, Hoekman and Cui (2015), and Foletti, Fugazza, Nicita and Olarreaga (2011) Exogenous unilateral liberalization (India): Topalova and Khandelwal (2010), Bown and Tovar (2011) Aggregation and trade restrictiveness: Anderson and Neary (1992, 1994, 1996), Kee, Nicita and Olarreaga (2008, 2009), Feenstra (1995) Applied MFN rates, binding rates, and water: Beshkar, Bond and Rho (forthcoming), Nicita, Olarreaga, and Silva (2014), Handley (2014) Quantification: Ossa (2014) CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

5 Fig 1: Geographic Coverage of the Empirical Exercise The sample consists of: 31 countries: The G20 economies and developing countries with populations > 40 million In 2013 these economies comprise: 83% of the world s population, 91% of world GDP, 80% of world imports, and 79% of world exports. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

6 Roadmap of the talk Theme 1: Heterogeneity 1. Heterogeneity in the restrictiveness of border barriers Cross-sectional variation across countries and sectors. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

7 Table 1a: MFN Ad Valorem Import Tariffs, 2013 Country/territory MFN applied rate, simple average WTO binding rate, simple average Binding coverage Coverage of applied duties > 15% Coverage of binding rates > 15% Maximum MFN applied rate Coefficient of variation (applied) (1) (2) (3) (4) (5) (6) (7) G20 High-income Australia Canada European Union Japan Saudi Arabia South Korea United States Columns (1), (2), and (6) are ad valorem rates, and columns (3), (4), and (5) are shares of import products. Coefficient of variation in column (7) defined as standard deviation of tariff line duty rates divided by the simple tariff line level average of all duty rates. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

8 Table 1b: MFN Ad Valorem Import Tariffs, 2013 Country/territory MFN applied rate, simple average WTO binding rate, simple average Binding coverage Coverage of applied duties > 15% Coverage of binding rates > 15% Maximum MFN applied rate Coefficient of variation (applied) (1) (2) (3) (4) (5) (6) (7) G20 Emerging Argentina Brazil China India Indonesia Mexico Russia South Africa > Turkey Columns (1), (2), and (6) are ad valorem rates, and columns (3), (4), and (5) are shares of import products. Coefficient of variation in column (7) defined as standard deviation of tariff line duty rates divided by the simple tariff line level average of all duty rates. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

9 Table 1c: MFN Ad Valorem Import Tariffs, 2013 Country/territory MFN applied rate WTO binding rate Binding coverage Coverage applied duties > 15% Coverage binding rates > 15% Max MFN applied rate Coefficient of variation (1) (2) (3) (4) (5) (6) (7) Devel., other* Bangladesh Burma Colombia DR Congo Egypt > Ethiopia 17.3 ** ** 50.8 ** Iran 26.6 ** ** 45.7 ** Kenya Nigeria Pakistan Philippines Tanzania Thailand Ukraine Vietnam DR of the Congo (2010); Egypt (2012); Ethiopia (2012); Iran (2011) CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

10 Fig. 2: Avg. Applied MFN Tariffs and Tariff Bindings by industry and country group in 2013 CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

11 Fig. 3: Applied MFN Tariff Peaks in 2013 by industry and country group Notes: A tariff peak is defined as an HS-06 product with an applied MFN tariff greater than 15 percent. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

12 Figure 4: Tariff Escalation: Applied MFN Tariffs in 2013 by End Use Categories, Industry and Country Group Notes: End use categories for each HS06 product taken from the BEC, with mixed use goods dropped. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

13 Roadmap of the talk Theme 1: Heterogeneity 1. Heterogeneity in the restrictiveness of border barriers Cross-sectional variation across countries and sectors. Inter-temporal variation in border barriers. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

14 Table 2a: MFN Ad Valorem Import Tariffs Selected Economies in 1993, 2003 and 2013 GATT WTO Simple average applied membership membership MFN tariff for year year G20 High-income Australia Canada European Union ** Japan Saudi Arabia NM * South Korea * United States Notes: *data for that year not available and so chosen as the closest available year. **Different European Union member states became GATT Contracting Parties in different years. Ad valorem equivalent rates of tariffs applied as specific duties are omitted from the calculations. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

15 Table 2b: MFN Ad Valorem Import Tariffs Selected Economies in 1993, 2003 and 2013 GATT WTO Simple average applied membership membership MFN tariff for year year G20 Emerging Argentina Brazil China NM * India * Indonesia Mexico * * Russia NM * 8.9 South Africa Turkey Notes: *data for that year not available and so chosen as the closest available year. NM indicates GATT or WTO non-member. Ad valorem equivalent rates of tariffs applied as specific duties are omitted from the calculations. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

16 Table 2c: MFN Ad Valorem Import Tariffs Selected Economies in 1993, 2003 and 2013 GATT WTO Simple average applied membership membership MFN tariff for year year Developing, other* Bangladesh * Burma * Colombia * DR of the Congo NM * Egypt * * Ethiopia NM NM 28.9* 18.8* 17.3* Iran NM NM * Kenya * 15.2* 12.8 Nigeria * Pakistan * Philippines Tanzania Thailand Ukraine NM * 7.0* 4.5 Vietnam NM * Notes: *data for that year not available and so chosen as the closest available year. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

17 Figure 5: Annual Changes in Applied MFN Tariffs , by Country Group Notes: The simple average over HS06 products of the annual difference in MFN applied tariffs from the prior year. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

18 Fig. 6: Imp. Products with change in Applied MFN Tariffs greater than 5 percentage points per annum, , by country group Notes: The share of HS06 products for which the absolute value of the annual difference in MFN applied tariffs from the prior year was larger than 5 percentage points. Outliers are omitted. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

19 Roadmap of the talk Theme 1: Heterogeneity 1. Heterogeneity in the restrictiveness of border barriers Cross-sectional variation across countries and sectors. Inter-temporal variation in border barriers. Preferential Trade Agreements. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

20 Preferential Trade Agreements Various forms of preferential trading arrangements in existence Reciprocal Preferential Trade Agreements (PTAs) - free trade agreements, customs unions, and the Enabling Clause Unilateral preferences (GSP, AGOA, EBA, etc.) Other forms of preferential arrangements (plurilaterals, critical mass agreements, etc.) CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

21 Preferential Trade Agreements Stylized facts from WTO (2011) study on PTAs Share of intra-pta trade in world trade has nearly doubled from 18 percent in 1990 to 35 percent in 2008 (including intra-eu trade raises this: from 28 percent in 1990 to 51 percent in 2008) However, in a study of PTAs involving 85 countries and 90 percent of world trade in 2007, 66 percent of tariff lines with MFN tariff peaks (MFN rates 15 percent) have not been reduced at all through PTAs Between 49 percent (including intra-eu trade) and 65 percent (excluding intra-eu trade) of world trade takes place between countries that are not part of a common PTA. Excluding (including) intra-eu flows, only 16 percent (30 percent) of global trade is eligible for any preferential tariffs; less than 2 percent (4 percent) of global trade is eligible to receive preferences with margins above 10 percentage points. Excluding (including) intra-eu trade, 84 percent (70 percent) of world merchandise trade still takes place on an MFN basis. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

22 Empirical Literature using MFN tariffs Absence of the WTO - i.e., optimal tariffs: Broda, Limão and Weinstein (2008) Impact of GATT/WTO accession negotiations or multilateral rounds: Bagwell and Staiger (2011), Ludema and Mayda (2013) Impact of preceding preferential liberalization: Limão (2006, 2007), Karacaovali and Limão (2008), Estevaderordal, Freund and Ornelas (2008) Impact of real exchange rates, business cycles, and other aggregate-level shocks: Irwin (2012), for the Great Recession, see Kee, Neagu and Nicita (2013), Rose (2013), Gawande, Hoekman and Cui (2015), and Foletti, Fugazza, Nicita and Olarreaga (2011) Exogenous unilateral liberalization (India): Topalova and Khandelwal (2010), Bown and Tovar (2011) Aggregation and trade restrictiveness: Anderson and Neary (1992, 1994, 1996), Kee, Nicita and Olarreaga (2008, 2009), Feenstra (1995) Applied MFN rates, binding rates, and water: Beshkar, Bond and Rho (forthcoming), Nicita, Olarreaga, and Silva (2014), Handley (2014) Quantification: Ossa (2014) CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

23 Roadmap of the talk Theme 1: Heterogeneity 1. Heterogeneity in the restrictiveness of border barriers Cross-sectional variation across countries and sectors. Inter-temporal variation in border barriers. Preferential Trade Agreements. 2. Heterogeneity in the form of border barriers. Specific duties. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

24 Figure 7: Import Products with Specific Duties in 2013, by country CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

25 Figure 8: Import Products with Specific Duties 2013, by industry and country group Notes: Includes all countries, even those with zero MFN tariffs applied as specific duties. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

26 Roadmap of the talk Theme 1: Heterogeneity 1. Heterogeneity in the restrictiveness of border barriers Cross-sectional variation across countries and sectors. Inter-temporal variation in border barriers. Preferential Trade Agreements. 2. Heterogeneity in the form of border barriers. Specific duties. Temporary trade barriers. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

27 Table 3a: TTB Import Product Coverage , by country and policy Cumulative coverage by TTB ever in effect during AD law/ All AD CVD SG CSG initiation TTBs only only only only G20 High-income Australia 1906/na Canada 1904/na European Union 1968/ Japan 1920/ South Korea 1963/ United States 1916/ G20 Emerging Argentina 1972/na Brazil 1987/ China 1997/ India 1985/ Indonesia 1995/ Mexico 1986/ South Africa 1914/ Turkey 1989/ Developing, other Colombia 1990/ Pakistan 1983/ Philippines 1994/ Thailand 1994/ Notes: Saudia Arabia, Russia, Egypt and Ukraine omitted for poor/unavailable data. Table 3b CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

28 Fig. 9: Import Products Subject to New TTBs, TTB Investigations and Imposed Import Restrictions for Selected Economies Notes: Share of HS06 import protects subject to TTBs (antidumping, countervailing duties, global safeguards and China-specific transitional safeguards). CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

29 Figure 10: Import Products with an Imposed TTB in Effect , by policy-imposing economy and industry Notes: TTBs include antidumping, countervailing duties, global safeguards and Chinaspecific transitional safeguards. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

30 Table 4a: Exporters impacted by Temp Trade Barriers ranked by exports restricted by TTBs in 2013 TTB-affected TTB-affected share of 2013 value of 2013 exports to G20 exports to G20 Exporter (percent) Exporter (billions of 2013 dollars) 1. Latvia China China South Korea Ukraine United States Kuwait Japan South Korea India Argentina Thailand Moldova Indonesia Indonesia Russia India Mexico Russia Germany Slovenia Argentina Thailand Ukraine Macedonia Malaysia Trin. & Tobago Vietnam U.A.E Brazil Oman Italy Poland Canada Kenya U.A.E Vietnam France United States Singapore 0.5 Table 4b CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

31 Roadmap of the talk Theme 1: Heterogeneity 1. Heterogeneity in the restrictiveness of border barriers Cross-sectional variation across countries and sectors. Inter-temporal variation in border barriers. Preferential Trade Agreements. 2. Heterogeneity in the form of border barriers. Specific duties. Temporary trade barriers. Quotas, price undertakings, voluntary export restraints. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

32 Table 5: Implementation of EU Antidumping Measures Form of the Import Restriction (percentage) Export Origin All G20 High G20 Developing countries income Emerging Tariffs Ad valorem duty Specific duty Price undertakings Price undertaking Price undertaking/ad val. duty Duty if min. price breached CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

33 Roadmap of the talk Theme 1: Heterogeneity 1. Heterogeneity in the restrictiveness of border barriers Cross-sectional variation across countries and sectors. Inter-temporal variation in border barriers. Preferential Trade Agreements. 2. Heterogeneity in the form of border barriers. Specific duties. Temporary trade barriers. Quotas, price undertakings, voluntary export restraints. Theme 2: History repeats itself Adjustment to new competition Macroeconomic stress. Same sector with a different policy tool. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

34 Figure 11: Art. XXVIII Actions, by sector, Tariff renegotiations (count) ANI VEG FOOD MIN FUEL CHEM PLAS HIDE WOOD TEXT SHOE STON METAL MACH TRAN MISC G20 High income countries Developing countries Notes: Constructed by the authors from the L: reports from in the GATT digital archive. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

35 Figure 12: Art. XIX and Agreement on Safeguards share of SG investigations in sector, by decade United States European Core/European Union share of SG in sector ANI VEG FOOD MIN CHEM PLAS HIDE WOOD TEXT SHOE STON METAL MACH TRAN MISC share of SG in sector ANI VEG FOOD MIN FUEL CHEM PLAS HIDE WOOD TEXT SHOE STON METAL MACH TRAN MISC G20 High Income Countries G20 Emerging Countries share of SG in sector ANI VEG FOOD MIN FUEL CHEM PLAS HIDE WOOD TEXT SHOE STON METAL MACH TRAN MISC share of SG in sector ANI VEG FOOD MIN FUEL CHEM PLAS HIDE WOOD TEXT SHOE STON METAL MACH TRAN MISC Notes: The share is the count of SG investigations by HS06 product and exporter within a sector divided by the count of SG investigations summed over all industrial sectors. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

36 Figure 13: Article XII (BOP Actions), BOP actions G20 High income countries Developing countries G20 Emerging economies Source: Constructed by the authors from the L: reports from in the GATT digital archive. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

37 Figure 14: Art. VII and Agreement on Antidumping share of antidumping investigations in sector, by decade United States EEC/European Union share of AD in sector ANI VEG FOOD MIN CHEM PLAS HIDE WOOD TEXT SHOE STON METAL MACH TRAN MISC share of AD in sector ANI VEG FOOD MIN FUEL CHEM PLAS HIDE WOOD TEXT SHOE STON METAL MACH TRAN MISC G20 High Income Countries G20 Emerging Countries share of AD in sector ANI VEG FOOD MIN FUEL CHEM PLAS HIDE WOOD TEXT SHOE STON METAL MACH TRAN MISC share of AD in sector ANI VEG FOOD MIN FUEL CHEM PLAS HIDE WOOD TEXT SHOE STON METAL MACH TRAN MISC Notes: The share is the count of AD investigations by HS06 product and exporter within a sector divided by the count of AD investigations summed over all sectors. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

38 Roadmap of the talk Theme 1: Heterogeneity 1. Heterogeneity in the restrictiveness of border barriers Cross-sectional variation across countries and sectors. Inter-temporal variation in border barriers. Preferential Trade Agreements. 2. Heterogeneity in the form of border barriers. Specific duties. Temporary trade barriers. Quotas, price undertakings, voluntary export restraints. Theme 2: History repeats itself Adjustment to new competition Macroeconomic stress. Same sector with a different policy tool. Theme 3: Domestic policy preferences sometimes clash with commitments to free/freer trade. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

39 Case study: subsidies and import tariffs for solar panels Market development Output of Yingli Solar (MW) 1999+: EU consump. subsidies 2012: Chinese have 80% MS in EU 2013: EU import restrictions 2013: Chinese consump. subs. 2015: US imp. restrictions against China Policy Event Date Description German subsidies loans to install panels German feed-in tariff 2000, 2004, 2009 consumption subsidy EU AD Petition 24 July 2012 German PV firm filed petition for AD EU AD Ruling 4 Jun Provisional AD duty announced Devel. Guideline 15 Jul Efficiency regulations announced by the State Council of China NDRC Subsidy 30 Aug National Development and Reform Commission of China announced consumption subsidies EU AD final ruling 2 Dec Application of price floor and import tariffs US AD petition 31 Dec German PV firm filed petition for AD US AD final ruling Feb US AD against Chinese PV CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

40 Case study: consumer labeling for canned tuna How should the world trading system approach domestic regulations that serve local societal objectives, but have a negative impact on trade? In 2008, Mexico complained to the WTO about a US law that created a private, voluntary label for canned tuna. If various documentary evidence were produced, tuna could be marketed in the US as dolphin-safe. The US law prohibited the use of other third-party labeling schemes with weaker dophin protection. Mexico objected that the US law was discriminatory and excessively trade-restricting. The WTO AB concluded that the measure satisfied a legitimate regulatory objective but lacked even-handedness. CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

41 Summary A large empirical literature has used MFN tariffs to study numerous questions, but we still do not know why there is cross-country heterogeneity in trade policy (both in restrictiveness and in form of instrument). The broad patters of changes into new policy tools could be used to help us understand the role of policy in longer term analysis of development, product cycles and changing locations of production. Domestic policy is not simply a substitute for import tariffs as the focus is often a legitimate social goal, but conflicts seem likely to rise as economies become more integrated. How should the world trading system address this? CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

42 Appendix Table: Industry Classification HS02 Acronym Industry Sections ANIM Animal products, live animals VEGE Vegetable products FOOD Prepared foodstuffs, beverages, tobacco products, etc MINE Mineral products FUEL Mineral fuels 27 CHEM Chemicals PLAS Plastics and rubber HIDE Hides, skins, leather, etc WOOD Wood and articles of wood, pulp and paper TEXT Textiles, fibres, apparel, etc FOOT Footwear, headgear, umbrellas, feathers, etc STON Stone, cement, plaster, ceramics, glassware, pearls, etc META Base metals and articles of base metal MACH Machinery, mechanical appliances, electrical equipment TRAN Transportation: vehicles, aircraft, vessels MISC Miscellaneous CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

43 Table 3b: TTB Import Product Coverage , by country and policy Annual coverage by TTB Annual coverage by new in effect TTB investigation St. St. Mean Dev. Min. Max. Mean Dev. Min. Max. G20 High-income Australia Canada European Union Japan South Korea United States G20 Emerging Argentina Brazil China India Indonesia Mexico South Africa Turkey Developing, other Colombia Pakistan Philippines Thailand Notes: Saudia Arabia, Russia, Egypt and Ukraine omitted for poor/unavailable data. Table 3a CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44

44 Table 4b: Exporters impacted by Temp Trade Barriers ranked by exports restricted by TTBs in 1995 TTB-affected TTB-affected share of 1995 value of 1995 exports to G4 exports to G4 Exporter (percent) Exporter (billions of 2013 dollars) 1. South Korea Japan Venezuela South Korea Ukraine China Lithuania United States China Thailand Thailand Brazil Japan Malaysia Brazil Canada Turkey Hong Kong Russia Germany Egypt Russia Hong Kong Turkey Malaysia Singapore Saudi Arabia Netherlands Poland United Kingdom Singapore Italy Australia Venezuela United States Poland Argentina France South Africa Ukraine 0.2 Table 4a CPB & MAC (WB, CEPR & Cambridge ) The Empirical Landscape of Trade Policy May / 44