The puzzle of quality upgrading of Chinese exports from the trade liberalization perspective

Abstract

Trade liberalization could accelerate the process of quality upgrading through the competition effect. However, that the quality of Chinese exports exhibits an opposite performance pattern is puzzling. The present paper uses a framework based on multiproduct firms to analyse the mechanism of how the product quality of exports is affected by trade liberalization to explain this puzzle. The model includes two major mechanisms: the competition effect and the market effect. There is a huge gap in the influence on the product quality of exports between a decrease in tariff barriers and non‐tariff barriers: firms' product quality increases (decreases) when non‐tariff barriers (tariff barriers) fall. The data of Chinese firms from 2001 to 2011 supports this conclusion. Further research reveals that the influence of trade liberalization on the product quality of exports in China varies among different types of firms.

Sustainable Production, Non-Tariff Measures, and Trade Performance in RCEP Countries

“…Their studies show that NTMs have negative impacts on supply chains. Similarly, Ghodsi and Stehrer [23] and Huang et al [24] investigated the role played by NTMs in enhancing product quality and affecting trade, and they found that NTMs help increase the quality of imported goods. Deepika [25] and Luo and Bano [26] studied the impacts of NTMs on export competitiveness, and they show that the implementation of these measures increase firms' production costs in certain sectors and reduce domestic firms' competitiveness.…”

“…A sizeable literature has been published on the impacts of NTMs on trade [4,[14][15][16][17][18][19][20]. Most research has tended to focus on the implications of NTMs in general, and hence, several current studies have shifted attention to NTMs with specific purposes: improving supply chains [21,22], enhancing quality [23,24], and increasing export competitiveness [25,26].…”

Entrepreneurship and Export Product Quality Improvement

“…However, excessive tax incentives may promote output and export expansion, which could lead to a crowding out of human capital and a weakening of the quality of export products [24]. Trade liberalization will also promote the quality of export products, and the impact on the quality of export products is heterogeneous among different types of enterprises [25]. In terms of transmission mechanisms, trade liberalization can contribute to the quality of export products through increased competition [26], quality upgrading of intermediate inputs, and productivity gains [27].…”