How did China’s WTO entry benefit U.S. prices?

Mary Amiti, Mi Dai, Robert Feenstra and John Romalis

No 817, Staff Reports from Federal Reserve Bank of New York

Abstract: We analyze the effects of China?s rapid export expansion following World Trade Organization (WTO) entry on U.S. prices, exploiting cross-industry variation in trade liberalization. Lower input tariffs boosted Chinese firms? productivity, lowered costs, and, in conjunction with reduced U.S. tariff uncertainty, expanded export participation. We find that China?s WTO entry significantly reduced variety-adjusted U.S. manufacturing price indexes between 2000 and 2006. For the Chinese components of these indexes, one-third of the beneficial impact comes from Chinese exporters lowering their prices, while two-thirds of the beneficial impact comes from the entry of new Chinese exporters. China?s WTO entry also led other countries that export to the United States to lower their prices, which was partly offset by exit of these exporters. We find that this impact on competitor countries? prices is primarily explained by the reduction in China?s own input tariffs, so that policy action becomes the largest source of welfare gain for the United States from China?s WTO entry.

Keywords: exports; China; variety; trade liberalization; input tariffs (search for similar items in EconPapers)
JEL-codes: F12 F13 F14 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2017-06-01
New Economics Papers: this item is included in nep-cna and nep-int
Note: Previous Title: “How Did China’s WTO Entry Benefit U.S. Consumers?”
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Citations: View citations in EconPapers (4)

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