Global Supply Chains and Trade Policy

By Emily J. Blanchard, C. Bown, Robert C. Johnson. 2016

164 citations recorded by the source corpus.

How do global supply chain linkages modify countries' incentives to impose import protection? Are these linkages empirically important determinants of trade policy? To address these questions, this paper introduces supply chain linkages into a workhorse terms-of-trade model of trade policy with political economy. Theory predicts that discretionary final goods tariffs will be decreasing in the domestic content of foreign-produced final goods. Provided foreign political interests are not too strong, final goods tariffs will also be decreasing in the foreign content of domestically-produced final goods. The paper tests these predictions using newly assembled data on bilateral applied tariffs, temporary trade barriers, and value-added contents for 14 major economies over the 1995-2009 period. There is strong support for the empirical predictions of the model. The results imply that global supply chains matter for trade policy, both in principle and in practice.

Subfields: Development, Economics and Econometrics, Political Science and International Relations

View Paper: https://www.semanticscholar.org/paper/48c5edb7ed2177b8a24e22b830cace9a83b7dbc2

Citations in the corpus

• Determinants of Global Value Chain Participation: Cross-Country Evidence (2020, unknown): “41 Our use of an elasticity measure and population size as IV for tariffs finds a theoretical justification in the model by Blanchard, Bown, and Johnson (2016), where insights for trade policy in a world with both GVCs and endogenous trade policy (protection-for-sale) are derived. lower corporate…”