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Global supply chains and trade policy

Author

Listed:
  • Blanchard,Emily J.
  • Bown,Chad P.
  • Johnson,Robert Christopher
  • Blanchard,Emily J.
  • Bown,Chad P.
  • Johnson,Robert Christopher
Abstract
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.

Suggested Citation

  • Blanchard,Emily J. & Bown,Chad P. & Johnson,Robert Christopher & Blanchard,Emily J. & Bown,Chad P. & Johnson,Robert Christopher, 2016. "Global supply chains and trade policy," Policy Research Working Paper Series 7536, The World Bank.
  • Handle: RePEc:wbk:wbrwps:7536
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    International Trade and Trade Rules; Rules of Origin; Trade Policy; Trade and Multilateral Issues; Government Policies; Social Analysis; Quality of Life&Leisure; Youth and Governance; National Governance; Disability; Services&Transfers to Poor; Access of Poor to Social Services; Economic Assistance;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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