The Heterogeneous Effects of Trade Policy Uncertainty
This paper studies the effects of trade policy uncertainty on the extensive and intensive margins of trade for a sample of 65 exporters at the Harmonized System six-digit level. The paper measures trade policy uncertainty as the gap between binding tariff commitments under trade agreements (multilateral and regional agreements) and applied tariffs -- what is also known as tariffs' water. The results show that trade policy uncertainty is an important barrier to exports and its effects are heterogeneous. On average and at the current level of tariff commitments, the paper estimates that the elimination of water, without any change of the applied tariff, would increase the probability of exporting by 6 percent and trade volumes by 1.3 percent. The negative impact of trade policy uncertainty on export participation is higher for countries with low-quality institutions and in the presence of global value chains. For a sample of new acceding countries, the analysis finds that removing water would boost the probability of trading by 50 percent and exports by 16 percent. The paper also estimates that the current system of commitments boosts trade by between 10 and 30 percent, compared with a world where at any moment tariffs could be raised to an arbitrarily high level.
| Main Authors: | , , |
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| Format: | Working Paper biblioteca |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018-08
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| Subjects: | TARIFFS, BINDING OVERHANG, POLICY SPACE, NON-TARIFF BARRIERS, NTBs, WTO, WORLD TRADE ORGANIZATION, |
| Online Access: | http://documents.worldbank.org/curated/en/907341535379025233/The-Heterogeneous-Effects-of-Trade-Policy-Uncertainty-How-Much-Do-Trade-Commitments-Boost-Trade https://hdl.handle.net/10986/30319 |
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| Summary: | This paper studies the effects of trade
policy uncertainty on the extensive and intensive margins of
trade for a sample of 65 exporters at the Harmonized System
six-digit level. The paper measures trade policy uncertainty
as the gap between binding tariff commitments under trade
agreements (multilateral and regional agreements) and
applied tariffs -- what is also known as tariffs'
water. The results show that trade policy uncertainty is an
important barrier to exports and its effects are
heterogeneous. On average and at the current level of tariff
commitments, the paper estimates that the elimination of
water, without any change of the applied tariff, would
increase the probability of exporting by 6 percent and trade
volumes by 1.3 percent. The negative impact of trade policy
uncertainty on export participation is higher for countries
with low-quality institutions and in the presence of global
value chains. For a sample of new acceding countries, the
analysis finds that removing water would boost the
probability of trading by 50 percent and exports by 16
percent. The paper also estimates that the current system of
commitments boosts trade by between 10 and 30 percent,
compared with a world where at any moment tariffs could be
raised to an arbitrarily high level. |
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