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Tariffs and the Organization of Trade in China

Peter Morrow () and Loren Brandt ()

Working Papers from University of Toronto, Department of Economics

Abstract: This paper examines the impact of China's falling import tariffs on the organization of exports between ordinary and processing trade. These trade forms differ in terms of tariff treatment and the ability of firms to sell on the domestic market. At the industry level, we find that falling input tariffs are the source of 90 percent of the average increase in the share of exports occurring through ordinary trade, most of which occurs on the extensive margin through new entry. The choice of trade is also tied to the size of the domestic market, which processing firms cannot access. Consistent with the literature, we also document that the domestic content share of ordinary exports is 30 percentage points higher than for processing. Our back of the envelope calculations imply an increase in demand for local factors of production of 12-21 billion U.S. dollars in 2006 associated with the change in the composition of trade from processing to ordinary exports resulting from tariff cuts between 2000-2006.

Keywords: China; Processing Trade; Domestic Content; Tari s (search for similar items in EconPapers)
JEL-codes: F14 F15 F16 (search for similar items in EconPapers)
Pages: Unknown pages
Date: 2013-06-18
New Economics Papers: this item is included in nep-cna, nep-int and nep-tra
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Citations: View citations in EconPapers (25) Track citations by RSS feed

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Journal Article: Tariffs and the organization of trade in China (2017) Downloads
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