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Are duty drawbacks on exports worth the hassle?

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  • Elena Ianchovichina
Abstract
. Many countries use duty drawbacks on exports, yet there is no consensus whether countries should embrace or abandon them. The answer depends on countries' development priorities and economic conditions. An increase in the drawback has a positive impact on export competitiveness, but the welfare effect is ambiguous. A welfare increase is more likely if the economy is small with high input tariffs, low initial drawback, low administrative costs and tariff leakages. In China duty drawback removal after meeting its WTO commitments improves welfare, but hurts economic efficiency, export competitiveness, and real incomes. Further liberalization can mitigate these negative effects. Plusieurs pays utilisent ce genre de rabais de tarifs douaniers, mais il n'y a pas de consensus à savoir si on doit supporter ces mesures ou les abandonner. La réponse dépend des conditions économiques et des priorités de développement des divers pays. Un accroissement de ces réductions a un effet positif sur la compétitivité des exportations, mais ses effets sur le niveau de bien‐être sont ambigus. Un effet de bien‐être positif est plus probable si l'économie est petite et a des hauts tarifs sur les intrants, de faibles rabais, des coûts administratifs faibles, et peu de fuites. En Chine, l'élimination de ces rabais, en accord avec les engagements exigés par l'OMC, a amélioré le niveau de bien‐être, mais a eu un effet négatif sur l'efficacité, la compétitivé des exportations, et les revenus réels. Une libéralisation accrue peut atténuer ces effets négatifs.

Suggested Citation

  • Elena Ianchovichina, 2007. "Are duty drawbacks on exports worth the hassle?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 40(3), pages 881-913, August.
    • Handle: RePEc:wly:canjec:v:40:y:2007:i:3:p:881-913
    DOI: 10.1111/j.1365-2966.2007.00435.x
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    References listed on IDEAS

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    Cited by:

    1. Kuo‐I Chang & Kazunobu Hayakawa & Nuttawut Laksanapanyakul & Dionisius Narjoko & Ju Hyun Pyun & Francis Quimba, 2022. "Determinants of regional trade agreement utilisation: Evidence from multiple import countries in Asia," The World Economy, Wiley Blackwell, vol. 45(6), pages 1713-1736, June.
    2. Dennis Tao Yang, 2012. "Aggregate Savings and External Imbalances in China," Journal of Economic Perspectives, American Economic Association, vol. 26(4), pages 125-146, Fall.
    3. Siwage Dharma Negara & Dionisius A. Narjoko & Kazunobu Hayakawa, 2024. "Impacts of Tariff Rates on Input Source Choice: Evidence from Indonesia," The Developing Economies, Institute of Developing Economies, vol. 62(1), pages 28-44, March.
    4. Michelle Connolly & Kei-Mu Yi, 2015. "How Much of South Korea's Growth Miracle Can Be Explained by Trade Policy?," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(4), pages 188-221, October.
    5. Gnutzmann-Mkrtchyan, Arevik & Van Damme, Isabelle, 2020. "Expired measures, excess duty drawbacks and causation: The Appellate Body report in EU - PET (Pakistan)," Hannover Economic Papers (HEP) dp-665, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    6. Arevik Gnutzmann-Mkrtchyan & Isabelle Van Damme, 2019. "Expired measures, excess duty drawbacks and causation: The Appellate Body report in EU – PET (Pakistan)," RSCAS Working Papers 2019/81, European University Institute.
    7. repec:wsr:wpaper:y:2013:i:121 is not listed on IDEAS
    8. Fabrice Defever & Alejandro Riaño, 2012. "China's Pure Exporter Subsidies," CEP Discussion Papers dp1182, Centre for Economic Performance, LSE.
    9. Defever, F. & Reyes, J-D., 2016. "Does the Elimination of Export Requirements in Special Economic Zones A ect Export Performance? Evidence from the Dominican Republic," Working Papers 16/04, Department of Economics, City University London.
    10. Tatsuo Hatta, 2018. "Revenue-Constrained Combination of an Optimal Tariff and Duty Drawback," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 13(1), pages 52-67, March.
    11. Deng, Ziliang & Guo, Honglin & Zhang, Weifu & Wang, Chengqi, 2014. "Innovation and survival of exporters: A contingency perspective," International Business Review, Elsevier, vol. 23(2), pages 396-406.
    12. Mulu Gebreyesus & Ashagrie Demile, 2017. "Why export promotion efforts failed to deliver? Assessment of the export incentives and their implementation in Ethiopia," Working Papers 017, Policy Studies Institute.
    13. Brandt, Loren & Li, Bingjing & Morrow, Peter M., 2021. "Processing trade and costs of incomplete liberalization: The case of China," Journal of International Economics, Elsevier, vol. 131(C).
    14. Bussolo,Maurizio & Vargas Da Cruz,Marcio Jose, 2015. "Does input tariff reduction impact firms'exports in the presence of import tariff exemption regimes ?," Policy Research Working Paper Series 7231, The World Bank.
    15. Fabrice Defever & Alejandro Riaño, 2017. "China’s Dual Export Sector," Discussion Papers 2017-01, University of Nottingham, GEP.

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    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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