Peeling Away the Layers: Impacts of Durable Tariff Elimination

IMF Working Papers, May 10, 2018

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Peeling Away the Layers: Impacts of Durable Tariff Elimination

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Bibliographic details

• Authors: Arevik Gnutzmann-Mkrtchyan, Christian Henn
• Published: May 10, 2018
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781484353684.001

Key findings

• Durable MFN tariff elimination affects trade patterns through several layers, generating non-linear impacts.
• Complete tariff elimination results in a large additional trade gains over and above tariff reductions.
• Commitment to durable tariff elimination, through WTO bindings, further boosts both imports and exports of ITA members.
• Commitments under the ITA spurned development of a downstream IT export sector in “passive” signatories.

Identification and empirical strategy

• The WTO Information Technology Agreement (ITA) provides a unique setting to identify effects of non-discriminatory trade policies because:
  • (i) ITA constitutes a quasi-natural experiment as several “passive” signatories joined it as an unavoidable part of pursuing of a larger policy objective.
  • (ii) ITA's partial coverage of the IT sector provides a natural control group for cross-product identification.
• The partial coverage of the IT sector is used as a natural control group for cross-product identification.

Impacts on trade and global value chains

• Durable tariff elimination and WTO bindings produce:
  • Large additional trade gains beyond those from tariff rate reductions.
  • Further boosts to both imports and exports for ITA members.
• The effects are non-linear and operate through multiple layers, including downstream sector development in passive signatories.

Policy implications and themes

• Policy discussion centers on commitment effects (WTO bindings) and their role in enhancing trade flows.
• Durable, non-discriminatory tariff elimination can catalyze the development of export sectors downstream of affected products.
• Trade Policy Certainty and formal commitments under multilateral agreements can have distinct and measurable impacts beyond tariff rate changes.

Subjects and keywords (as listed)

• Subjects: Exports, Imports, Information technology in revenue administration, International trade, Revenue administration, Tariffs, Taxes, Trade policy
• Keywords: commitment effect, Exports, Global, Global Value Chains, Imports, Information Technology Agreement, Information technology in revenue administration, ITA accession, ITA export sector, ITA exporter commitment effect, ITA goods, ITA membership, ITA product export, ITA products, ITA signatory, MFN Tariff Elimination, Non-discriminatory Trade Policies, Product-Level Data, tariff elimination, tariff reduction, Tariffs, Trade policy, Trade Policy Certainty, World Trade Organization, WP

Content in this bundle

• Peeling Away the Layers: Impacts of Durable Tariff Elimination, WP/18/109, May 2018
  • Peeling Away the Layers: Impacts of Durable Tariff Elimination, WP/18/109, May 2018 (Markdown version)
  • Peeling Away the Layers: Impacts of Durable Tariff Elimination, WP/18/109, May 2018 (PDF)