Unilateral Tariff Liberalisation

Race‐to‐the‐bottom Tariff Cutting

“…The race-to-the-bottom unilateralism, a conjecture stylized by Baldwin (2010) but also mentioned by Kimura (2003) and Ando and Kimura (2005). In its simplest form, "developmental state" governments interested in fostering industrialization per se (Johnson, 1982) cut tariffs in a competition to attract or retain FDI.…”

“…Maggi and Goldberg, 1999) that points to the role of special interests lobbying for protection (Grossman and Helpman, 1994), but lobbying can also be pro-liberalization, for example, when foreign companies lobby for market access (Gawande et al, 2006), when importers lobby for tariff suspensions (Ludema et al, 2010), or when exporters expect reciprocity and thus lobby for tariff cuts at home (Krishna and Mitra, 2005;Baldwin and Robert-Nicoud, 2008). RACE-TO-THE-BOTTOM TARIFF CUTTING 445 Ando and Kimura (2005), Baldwin (2010) and suggest tariff cuts can also be driven by an international competition for foreign direct investment (FDI) as low tariffs are a decisive locational determinant for foreign firms that rely on imports of components for local processing. 2 This paper tests empirically for the presence of such competition-driven liberalization, which I refer to as race-to-the-bottom tariff cutting, focusing on seven Asian emerging economies.…”

“…A possible trigger of this tariff race to the bottom is the sudden rise in production offshoring. Baldwin (2010) argues it was the revolution in information and communication technologies that made it possible to organize complex tasks across countries and hence led to production fragmentation. Other factors specific to Japan may also explain the rise of Japanese offshoring (Figure 3), which was the main source of competition between emerging Asian economies (Lamy and Higgott, 2006).…”

A Shifting Mandate: International Ownership, Global Fragmentation, and a Case for Deeper Integration under the WTO

“…For nearly a decade, the prevailing view within the economic literature was therefore that the shallow integration mandate of the GATT/WTO embodied in the core principles of MFN and reciprocity was sufficient to fully exhaust the potential gains from multilateral trade negotiations. More recently, this view has been extended in the context of foreign ownership, offshoring, and global supply chains by Antràs and Staiger (2012a), Blanchard (2007), and (2010), Baldwin et al (2009), and Baldwin (2010) among others.…”

Threats or Promises? A Built-in Mechanism of Gradual Reciprocal Trade Liberalization*

“…More specifically, the country that is allowed to move in the first period cuts its tariff, the second country responds by cutting its tariff, the first country then reacts by further cutting its tariff again, and this process continues and 1 Krishna and Mitra (2005) and Coates and Ludema (2001) explain unilateral trade liberalization based on lobbying activities, but they do not consider the gradual feature of liberalization processes. Baldwin (2010) introduces some political economy mechanisms of unilateral trade liberalization by developing nations with particular emphasis on the role of production unbundling. gradually converges to the steady state.…”