Intellectual property, tariffs, and international trade dynamics

The emergence of global value chains leads not only to a magnification of trade in intermediate inputs, but also to extensive technology diffusion. Moreover, the lack of enforcement of intellectual property rights has recently become a subject of debate in the context of China-US trade negotiations. In this paper, the interaction between tariffs and the enforcement of intellectual property rights is studied within a quantitative general equilibrium framework. Results indicate that tariffs could be an effective deterrent for weak protections for intellectual property and weakening enforcement of intellectual property rights may be a strong deterrent for raising tariffs.