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The political economy of tariff protection in China: evidence from the WTO accession

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  • Chang Hong

Abstract

We analyze China's tariff rates at WTO accession using a political economy approach. A model drawing on Branstetter and Feenstra is used to derive an optimal tariff rate for each industry. The model predicts that a government would set a high tariff rate if an industry is of large state‐owned enterprise (SOE) share, multinational share, or small foreign import share. From the model we reveal the Chinese government's preference towards different interest groups under the binding tariff constraint from the WTO commitments. The estimated structural parameters imply that the political weights on both the SOE profits and consumer income diminish with the economic opening. More important, the government still favours SOEs over consumer income. Our findings are consistent with the special features of China's economy. Economie politique de la protection tarifaire en Chine: résultats dérivés de l'accession à l'OMC. L'auteur analyse, à l'aide d'une approche d'économie politique, les droits de douane de la Chine lors de son accession à l'Office mondial du commerce. Un modèle s'inspirant de Branstetter & Feenstra est utilisé pour dériver un droit de douane optimal pour chaque industrie. Le modèle prédit qu'un gouvernement va fixer un droit de douane élevé si l'industrie est soit partie du grand secteur des entreprises d'État (EE), du secteur des multinationales, ou du secteur où l'importation est peu importante. On révèle les préférences du gouvernement chinois entre les divers groupes d'intérêts face aux contraintes imposées par les engagements vis‐à‐vis l'Office mondial du commerce. Les paramètres structurels calibrés impliquent que le poids politique à la fois des profits des EE et des revenus des consommateurs diminue quand il y a libéralisation du commerce. Plus important peut‐être, le gouvernement favorise toujours les profits des EE plutôt que le revenu des consommateurs. Ces résultats s'arriment bien aux caractéristiques spéciales de l'économie chinoise.

Suggested Citation

  • Chang Hong, 2013. "The political economy of tariff protection in China: evidence from the WTO accession," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 46(4), pages 1295-1316, November.
    • Handle: RePEc:wly:canjec:v:46:y:2013:i:4:p:1295-1316
    DOI: 10.1111/caje.12049
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    References listed on IDEAS

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    Cited by:

    1. Lyu, Jianxing & Prehn, Soren & Zhang, Yanjie & Glauben, Thomas & Zeng, Yinchu, 2021. "Trade creation, political sensitivity and product exclusions: the political economy of agriculture protection in China’s FTAs," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 63(03), January.
    2. Mumtaz Hussain Shah, 2017. "Inward FDI in East Asian & Pacific Developing Countries due to WTO Led Liberalisation," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 9(2), pages 1-20, June.

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