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51. The Impact of Intranational Trade Barriers on Exports: Evidence from a Nationwide VAT Rebate Reform in China

Author:
Jie Bai and Jiahua Liu
Publication Date:
12-2019
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
It is well known that various forms of non-tariff trade barriers exist within a country. Empirically, it is difficult to measure these barriers as they can take many forms. We take advantage of a nationwide VAT rebate policy reform in China as a natural experiment to identify the existence of these intranational barriers due to local protectionism and study the impact on exports and exporting firms. As a result of shifting tax rebate burden, the reform leads to a greater incentive of the provincial governments to block the domestic flow of non-local goods to local export intermediaries. We develop an open-economy heterogenous firm model that incorporates multiple domestic regions and multiple exporting technologies, including the intermediary sector. Consistent with the model’s predictions, we find that rising local protectionism leads to a reduction in interprovincial trade, more “inward-looking” sourcing behavior of local intermediaries, and a reduction in manufacturing exports. Analysis using micro firm-level data further shows that private companies with greater baseline reliance on export intermediaries are more adversely affected.
Topic:
International Trade and Finance, Political Economy, Reform, and Tariffs
Political Geography:
China and Asia

52. How Do Technical Barriers to Trade Affect Foreign Direct Investment?

Author:
Mahdi Ghodsi
Publication Date:
01-2019
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
Trade liberalisation and the EU enlargement in the past two decades allowed European multinational enterprises (MNEs) to benefit from production fragmentation in Central, East and Southeast Europe (CESEE). Recent studies show that market regulations and standards that are embedded within Technical Barriers to Trade (TBTs) might not necessarily hamper trade but improve the quality of products, production procedures, and market efficiencies. However, complying with the regulations embedded in the TBTs imposed by a host country might be costly enough to discourage MNEs from investing there. Furthermore, MNEs from countries that impose more regulations and standards might be more capable of investing abroad. This article analyses how TBTs imposed by both home and host countries affect inward FDI stocks in the CESEE countries during the period 1996-2016. The results suggest that Specific Trade Concerns (STCs) raised on trade-restrictive TBTs imposed by CESEE countries induce ‘tariff jumping’ motives of investment to these countries, while regular TBTs as indications of positive externalities and efficiency gains at home discourage outward FDI. Besides, FDI stocks by non-EU28 countries are found to be stimulated by regular quality TBTs imposed by the host economies.
Topic:
International Trade and Finance, Foreign Direct Investment, European Union, Regulation, and Tariffs
Political Geography:
Europe

53. U.S.-China Economic Relations Under the Trump Administration at the 2-Year Mark

Author:
Peter Harrell
Publication Date:
07-2019
Content Type:
Journal Article
Journal:
Joint U.S.-Korea Academic Studies
Institution:
Korea Economic Institute of America (KEI)
Abstract:
Since entering office in 2017, President Trump has upended longstanding tenets of U.S. trade policy and launched the most aggressive set of new U.S. tariffs and trade restrictions since at least the Reagan administration in the 1980s. Actions include renegotiating the U.S.-Korea FTA (KORUS) and NAFTA, using “Section 232” of the Trade Expansion Act of 1962 to impose tariffs on most steel and aluminum imports into the U.S. in a bid to support U.S. smelters, using “Section 301” of the Trade Act of 1974 to impose tariffs on approximately half of U.S. imports from China, and threatening to use Section 232 to impose tariffs reportedly up to 25% on U.S. imports of automobiles. The administration’s aggressive stance on trade has upended diplomatic relationships and prompted multinational companies to re-consider aspects of their global supply chains. It has also brought retaliation, including Chinese tariffs on most Chinese imports of U.S. goods. European countries and other U.S. allies affected by Trump’s steel and aluminum tariffs have also retaliated with tariffs of their own against imports of U.S. goods, with many of the retaliatory tariffs targeting perceived politically important constituencies in the U.S., such as U.S. whisky distillers, who are heavily concentrated in the home state of Republican Senate Majority Leader Mitch McConnell. But Trump’s aggressive trade policies also began to deliver some successes in 2018, including a successful renegotiation of NAFTA, now renamed the U.S.-Mexico-Canada Trade Agreement (USMCA), a renegotiated Korea-U.S. FTA, and at least some willingness by European and Japanese officials to discuss greater market access for U.S. products. While many major U.S. importers and trade associations have complained about the tariffs, the tariffs continue to draw support from several of the key constituency groups that they are intended to assist, such as the U.S. steel industry. While U.S. tariffs against imports from allies are seemingly driven largely by the Trump administration’s general protectionist bent, Trump’s trade actions against China reflect a broader set of concerns that is more widely supported by members of the United States congress and American experts outside of government. These include both longstanding U.S. concerns over Chinese trade practices and market access barriers, and growing U.S. geopolitical competition with China—what the Trump administration’s National Security Strategy, released in December 2017, refers to as the return of “great power competition.” These geopolitical concerns have been central to the administration’s recent aggressive efforts to block the deployment of Huawei telecommunications technologies in new “5G” mobile communications networks around the world, and in the administration’s increasingly vociferous opposition to China’s “Belt and Road Initiative" (BRI). And because of increased U.S.-China geopolitical competition, U.S. use of targeted trade controls, investment restrictions, potential targeted sanctions, and other measures against China, will likely continue even if, as is widely expected, Trump and President Xi reach a broad agreement on many trade issues in the coming months and reduce some of the tariffs that are currently in place.
Topic:
Economics, Bilateral Relations, Tariffs, and Trade
Political Geography:
China, Asia, North America, and United States of America

54. Manila’s Tariff Move on Imported Rice: Implications for the Region

Author:
Jose M. L. Montesclaros
Publication Date:
11-2019
Content Type:
Commentary and Analysis
Institution:
Centre for Non-Traditional Security Studies, S. Rajaratnam School of International Studies
Abstract:
The Philippines’ removal of quotas on rice imports leads to increased competition, with negative short-term impacts on its farmers and on poorer urban ASEAN consumers. In the long-run, however, these challenges may serve as a strong push to upgrade regional rice production practices.
Topic:
International Trade and Finance, Tariffs, ASEAN, and Imports
Political Geography:
Philippines and Southeast Asia

55. Implications of migration to cost-reflective tariffs in Eswatini’s electricity sector

Author:
Mangaliso Mohammed and Thabo Sacolo
Publication Date:
01-2019
Content Type:
Working Paper
Institution:
Eswatini Economic Policy Analysis and Research Centre (ESEPARC)
Abstract:
The study investigates the possible impacts of migrating to cost reflective tariffs in Eswatini’s electricity sector. This involves assessing the electricity consumptions patterns of the different electricity customer categories in relation to the electricity tariffs to estimate potential responses to future price changes that might be induced by cost-reflective tariffs. For the domestic customer category, the study uses the own-price elasticity method while for the non-domestic customer it estimates the elasticities using the Seemingly Unrelated Regression adopted from Inglesi-Lotz and Blignaut (2011). The study finds that a 2 cent real increase in electricity tariff is associated with a decrease in average consumption of 185.6 kWh for the domestic customer. Average elasticity over the 21-year period is -0.58 implying that domestic customers do not respond much to changes in electricity tariffs. For the non-residential customers, the industrial customer group is the only group significantly impacted by changes in electricity tariff. The elasticity coefficient for the industrial customer group is -0.157, which implies that even though this customer group responds to changes in electricity tariff, a proportionate increase in electricity price results in a less than proportionate decrease in electricity consumed. Overall, the study finds that demand for electricity for both domestic and non-domestic customer group is not responsive to changes in electricity tariff, that is, demand is inelastic. This means the cost reflective tariffs will most likely decrease intensive use of electricity in Eswatini, especially for low income households, which will make extending the grid and supplying electricity to low income households a much more expensive endeavour for the utility. The study recommends that before implementing the cost-reflective tariffs, the energy regulator (ESERA) should ensure that the utility (EEC) establishes efficiency improvements on the supply and distribution of electricity in Eswatini. In the long-run Eswatini should expedite national plans to increase local production of power to reduce the cost of power.
Topic:
Energy Policy, Migration, Borders, Tariffs, Local, and Electricity
Political Geography:
Africa and Eswatini

56. The African Continental Free Trade Agreement (AfCFTA)

Author:
Michael Asiedu
Publication Date:
05-2018
Content Type:
Policy Brief
Institution:
Global Political Trends Center (GPoT)
Abstract:
On 21 March, 2018, 44 African heads of state and government dignitaries signed a historic African Continental Free Trade Agreement (AfCFTA) at the 10th Ordinary Session of African Union (AU) Heads of State Summit held in Kigali, Rwanda. The AfCFTA is the largest free trade area since the World Trade Organization (WTO) was established in 1995. The Session was under the theme: “Creating One African Market,” and falls under AU’s Agenda 2063 Initiative. The AfCFTA is also one of the biggest free-trade areas with regards to the number of countries, thus, encompassing 1.2 billion people with over $4 trillion in combined consumer and business spending should the remaining 11 AU member countries join the Agreement (Signe, 2018). The AfCFTA would additionally become effective 30 days subsequent to ratification by the legislative houses of at least 22 African countries; countries that signed the Agreement have 120 days for its ratification. This paper seeks to outline the significance of the Agreement, its aims, challenges and the continuous work needed to sustain it going forward with potential impact it may have on third country agreements with AU member countries.
Topic:
Treaties and Agreements, Economy, Tariffs, Free Trade, and African Union
Political Geography:
Africa

57. Investment Challenges in Zambia’s Electricity Supply Industry: A Cursory Assessment

Author:
Mwanda Phiri and Francis Ziba
Publication Date:
05-2018
Content Type:
Working Paper
Institution:
Hudson Institute
Abstract:
During the tide of economic liberalisation in the 1990s, Zambia’s electricity market was liberalised with the aim of stimulating private sector participation. More than 20 years after market liberalisation, the power crisis in 2015 revealed that the industry had failed to attract the envisaged private sector investment required to expand and diversify energy generation sources and meet the increasing demand for electricity over the years. It became apparent that the various reforms taken to liberalise the industry, increase private sector participation and promote competition had fallen short of meeting these objectives. Zambia’s electricity supply industry still remained a semblance of a monopoly dominated by one large vertically integrated state-owned corporation responsible for the generation, transmission, distribution and supply of electricity. Given the important role of electricity in driving economic growth, this paper illuminates the barriers to entry in the ESI and the factors limiting competition. Drawing mainly on secondary sources, the study finds that at the very start, limited access to finance for energy projects potentially prevents the commencement of energy projects. Exacerbating the entry barriers are the below-cost electricity tariffs, the monopoly power held by ZESCO and its vertical integration and an inadequate regulatory framework to promote competition and prevent undue political interference. These findings justify the partial unbundling of ZESCO and the provision of legal reforms that support policy consistency, multi-year tariff adjustments and open and nondiscriminatory access to the transmission and distribution grids.
Topic:
Energy Policy, Regulation, Neoliberalism, Tariffs, and Electricity
Political Geography:
Africa and Zambia

58. China Responds to Trade Tensions Responsibly

Author:
Su Qingyi
Publication Date:
09-2018
Content Type:
Policy Brief
Abstract:
In March 2018, the United States slapped tariffs of 25 percent on steel imports and 10 percent on aluminum in the name of national security under Section 232 of the Trade Expansion Act of 1962. Then, the Office of the United States Trade Representative released a report on the investigation of China under Section 301 of the Trade Act of 1974, claiming China’s acts, policies, and practices regarding technology transfer, intellectual property, and innovation are “unreasonable and discriminatory, and burden U.S. commerce.” In early April, it issued a list of products imported from China subject to additional tariffs of 25 percent totaling US $50 billion. In June, Donald Trump approved the tariff imposition on US $50 billion worth of Chinese goods, officially starting from Chinese exports worth US $34 billion on July 6. The remaining US $16 billion was to be imposed later. In July, the U.S. issued another trade barrier of 10 percent tariff on imports from China with a value of US $200 billion. On August 1, U.S. Trade Representative Robert Lighthizer said the barriers were suggested by President Trump, who ordered to increase the amount to 25 percent.
Topic:
International Trade and Finance, Tariffs, Trade Wars, and Trade
Political Geography:
China, Asia, North America, and United States of America

59. China can overcome a trade war

Author:
Su Qingyi
Publication Date:
08-2018
Content Type:
Policy Brief
Abstract:
The tariff war the United States has launched against China shows no sign of abating, as the Donald Trump administration made good its threat to impose 25 percent tariff on another $16 billion worth of Chinese imports on Thursday. Instead, since the US has threatened to slap tariffs on $500 billion worth of Chinese goods, or on almost all Chinese imports, the trade conflict seems set to intensify. Thanks to its national strength and moral righteousness, as well as its objective assessment that the US' tariff war will have a limited impact on the Chinese economy, China is confident and capable of safeguarding the core interests of the country and its people. The trade dispute, however, will affect on three areas－foreign trade, investment (including overseas investment) and the macro-economy. But the impact is likely to be limited and manageable.
Topic:
Economy, Tariffs, Trade Wars, and Trade
Political Geography:
China, Asia, North America, and United States of America

60. US tariff measures may boomerang

Author:
Dong Yan
Publication Date:
07-2018
Content Type:
Policy Brief
Abstract:
US President Donald Trump has launched a tariff war not only against China but also against some other economies and threatened to undermine the multilateral trading system. Apart from China, quite a few other economies have also taken countermeasures to Trump's unilateral and protectionist moves. For instance, Russia plans to impose 25-40 percent tariff on US industrial goods, including equipment for road construction, oil and gas, and mining in response to the US tariffs on Russian metals.
Topic:
Multilateralism, Tariffs, Trade Wars, and Donald Trump
Political Geography:
Russia, China, and United States of America