Taking Stock of Trade Policy Uncertainty: Evidence from China’s Pre-WTO Accession

Alessandria, George; Khan, Shafaat Yar; Khederlarian, Armen

doi:10.3386/w25965

Cited by 24 publications

(18 citation statements)

References 16 publications

(36 reference statements)

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“…Approvals usually occurred in July-September of each year, and several studies noted a relationship between approval timing and trade flows. For instance, Alessandria, Khan, and Khederlarian (2019) found that trade flows increased especially in the months preceding the annual renewal of NTR by the U.S. Congress, that is TPU increased trade. Their empirical model with intrayear variation employed the gap between NTR and non-NTR tariffs, which were as high as 30% for several industries, as the measure of uncertainty.…”

Section: Uncertainty From Binding Overhangmentioning

confidence: 99%

“…The issue of trade policy uncertainty is not new: Episodes of trade disputes among major economies have been well documented, for example Urata (2019) on the US-Japan dispute during the 1980s leading to voluntary export restraints (VER) and import expansion by Japan; Ling, Li, and Swenson (2017) on China's pre-WTO accession and others. Nonetheless, the recent episode takes on significance given the depth of global integration and the uncertainty surrounding these trade restrictions (Handley and Limao 2017;Crowley, Meng, and Song 2018;Alessandria, Khan, and Khederlarian 2019;Steinberg 2019;Amiti, Kong, and Weinstein 2019b;Caldara et al 2020). For instance, figure 1 from the World Trade Organization (WTO) shows the extent of uncertainty in trade policy in the last two years, i.e., a spike in trade restrictive measures imposed by countries and their trade coverage in 2018 and 2019.…”

Section: Introductionmentioning

confidence: 99%

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Does Trade Policy Uncertainty Affect Agriculture?

Gopinath¹

2020

Applied Eco Perspectives Pol

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This article reviews evidence of trade war impacts and emerging concerns on trade policy uncertainty. Trade war's near-perfect pass-through of tariffs to US prices favored producers and generated government revenue at the expense of consumers. Facing retaliation, prices and trade volumes were found to be lower for US agricultural commodities. The recent rethink on the benefits of globalization by major economies has led to uncertain policy paths wherein firms and consumers continue to make decisions. Using quarterly data, a negative association between policy uncertainty and agricultural economic indicators is affirmed with implications for future evaluation of trade war impacts.

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Section: Uncertainty From Binding Overhangmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Does Trade Policy Uncertainty Affect Agriculture?

Gopinath¹

2020

Applied Eco Perspectives Pol

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“…Handley and Limão (2017) show this has important price and welfare e¤ects and extend this logic to entry and technology-upgrading decisions but not to global sourcing decisions. Uncertainty can also a¤ect exports via inventory e¤ects(Alessandria et al, 2019).…”

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confidence: 99%

Firm Input Choice Under Trade Policy Uncertainty

Handley¹,

Limão²,

Ludema³

et al. 2020

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We examine the role of trade policy uncertainty in shaping the import decisions of firms. If the adoption of a new input requires a sunk cost investment, then the prospect of price increases in that input, e.g. due to trade barriers, reduces the adoption of that input (a substitution effect) and possibly other inputs (complementarity via lower profits). Thus trade policy uncertainty can affect a firm's entire input mix. We provide a new model of input price uncertainty that captures both effects and derive its empirical implications. We test these using an important episode that lowered input price uncertainty: China's accession to the WTO and the associated commitment to bind its import tariffs. We estimate large increases in imported inputs by firms from accession; the reduced uncertainty from commitment generates substitution effects larger than the reductions in applied tariffs in 2000-2006 and has significant profit effects.

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“…An alternative ap-proach for capturing the consequences of trade policy uncertainty turns instead to the estimation of structural models (Steinberg, 2019). 6 Alessandria et al (2019) use within year timing of TPU prior to China's WTO accession to quantify TPU, and our work allows us to identify the timing of TPU effects, including the short-to medium-run changes. 7 This paper also contributes to a literature that has studied the impact of trade policies or trade shocks on Chinese firms.…”

Section: Contribution To the Literaturementioning

confidence: 99%

Anxiety or Pain? The Impact of Tariffs and Uncertainty on Chinese Firms in the Trade War

Benguria¹,

Choi²,

Swenson³

et al. 2020

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The unexpected outbreak of the U.S.-China trade war led to dramatic increases in the import and export tariffs confronting Chinese firms. Due to firm-level differences in trade engagement, customs trade data combined with tariff changes allow us to measure firm-level exposure to the trade war. Further, by adopting a new textual analysis approach to listed firms' annual reports, we develop trade policy uncertainty (TPU) measures that vary over firms and time. Our differencein-differences examination of these firm-level data reveals that trade war increases in U.S. tariffs and Chinese retaliatory tariffs both raised Chinese firms' TPU. The impact of tariffs on uncertainty is heterogeneous, and is most pronounced for smaller and less capital-intensive firms. This effect is also smaller for Chinese exporters that were more diversified in terms of partner countries. In the second stage of our analysis we explore and document the negative connection between Chinese firm-level increases in TPU and subsequent firm performance. Our estimates indicate that Chinese firms hit by a one standard deviation increase in TPU during the trade war reduced firm-level investment, R&D expenditures, and profits by 1.4, 2.7, and 8.9 percent, respectively.

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Taking Stock of Trade Policy Uncertainty: Evidence from China’s Pre-WTO Accession

Cited by 24 publications

References 16 publications

Does Trade Policy Uncertainty Affect Agriculture?

Does Trade Policy Uncertainty Affect Agriculture?

Firm Input Choice Under Trade Policy Uncertainty

Anxiety or Pain? The Impact of Tariffs and Uncertainty on Chinese Firms in the Trade War

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