Global value chains and the removal of trade protection

• Published in: European economic review Vol. 140; p. 103937
• Main Authors: Bown, Chad P., Erbahar, Aksel, Zanardi, Maurizio
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.11.2021
• Subjects: Antidumping; Global value chains; Trade protection; F14; F13; F68; Antidumping; Trade protection; Global value chains
• ISSN: 0014-2921; 1873-572X
• DOI: 10.1016/j.euroecorev.2021.103937

This paper examines how trade protection is affected by changes in the value-added content of production arising through global value chains (GVCs). Exploiting a new set of WTO rules adopted in 1995 that impose an exogenously-timed requirement for countries to re-evaluate their previously-imposed trade protection, we adopt an instrumental variables strategy and identify the causal effect of GVC integration on the likelihood that a trade barrier is removed. Using a newly constructed dataset of protection removal decisions involving 10 countries, 41 trading partners, and 18 industries over 1995–2013, we find that bilateral industry-specific domestic value-added growth in foreign production significantly raises the probability of removing a duty. The results are not limited to imports from China but are only found for the protection decisions of high-income countries. Back-of-the-envelope calculations indicate that rapid GVC growth in the 2000s freed 15% of the trade flows subject to the most common temporary restrictions (i.e. antidumping) applied by high-income countries in 2007.