TY - JOUR
T1 - Preferential and multilateral liberalization
T2 - Evidence from Latin America's use of tariffs, antidumping and safeguards
AU - Tovar, Patricia
N1 - Publisher Copyright:
© 2019 Elsevier B.V.
PY - 2019/11
Y1 - 2019/11
N2 - I test the predictions of Bagwell and Staiger's (1999) theory of the effects of preferential liberalization on import protection imposed against non-member countries. In contrast to the existing literature, which has (for the most part) focused on investigating whether external tariffs rise or fall due to preferential trade liberalization, by testing the predictions of a specific model in a way that closely follows the theory, I am able to examine the channels through which those effects take place. Importantly, and unlike most existing studies, I analyze not only tariffs but also the temporary trade barrier (TTB) policies of antidumping and safeguards. I focus on Latin America and find strong support for the theoretical predictions of Bagwell and Staiger (1999). First, there is evidence of tariff complementarity: i) a larger reduction in the preferential import protection leads to a larger reduction in protection against non-members; ii) the more consumption increases, the more external protection decreases with the fall in preferential protection; and iii) the more imports from the rest of the world fall, the more external protection decreases with a preferential protection cut. Furthermore, I also find evidence consistent with the punishment effect and the tariff discrimination effect, which arise when enforcement difficulties are incorporated into the theory. Finally, the overall results point toward a building block effect of preferential liberalization.
AB - I test the predictions of Bagwell and Staiger's (1999) theory of the effects of preferential liberalization on import protection imposed against non-member countries. In contrast to the existing literature, which has (for the most part) focused on investigating whether external tariffs rise or fall due to preferential trade liberalization, by testing the predictions of a specific model in a way that closely follows the theory, I am able to examine the channels through which those effects take place. Importantly, and unlike most existing studies, I analyze not only tariffs but also the temporary trade barrier (TTB) policies of antidumping and safeguards. I focus on Latin America and find strong support for the theoretical predictions of Bagwell and Staiger (1999). First, there is evidence of tariff complementarity: i) a larger reduction in the preferential import protection leads to a larger reduction in protection against non-members; ii) the more consumption increases, the more external protection decreases with the fall in preferential protection; and iii) the more imports from the rest of the world fall, the more external protection decreases with a preferential protection cut. Furthermore, I also find evidence consistent with the punishment effect and the tariff discrimination effect, which arise when enforcement difficulties are incorporated into the theory. Finally, the overall results point toward a building block effect of preferential liberalization.
KW - Antidumping
KW - Multilateral liberalization
KW - Preferential trade agreements
KW - Safeguards
KW - Tariffs
KW - Temporary trade barriers
UR - http://www.scopus.com/inward/record.url?scp=85072181041&partnerID=8YFLogxK
U2 - 10.1016/j.jdeveco.2019.102383
DO - 10.1016/j.jdeveco.2019.102383
M3 - Article
AN - SCOPUS:85072181041
SN - 0304-3878
VL - 141
JO - Journal of Development Economics
JF - Journal of Development Economics
M1 - 102383
ER -