University of Nottingham Ningbo China
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Measuring China's Trade Liberalisation: a Generalised Measure of Trade Restrictiveness Index

29 October 2013 (14:00-15:30)

The School of Economics and The Nottingham Centre for Research on Globalisation and Economic Policy (GEP) China are pleased to invite you to the following research seminar given by Dr Bo Chen from Shanghai University of Finance and Economics.

About the seminar

Both simple average and import-weighted average tariff indexes may be misleading measures of tariff barriers. In this paper, we propose a generalised trade restrictiveness index (GTRI) that extends Feenstra's (1995) tariff restrictiveness index (TRI) by relaxing his crucial assumption of a small open economy. We show that GTRI can be measured using import tariffs, import shares, and the corresponding import and foreign export elasticities. We then apply the GTRI to measure China's trade liberalisation during and after China's accession into the World Trade Organization (WTO) in 2001, using highly disaggregate Chinese import and tariff data from 1997 to 2008. Prior to its WTO accession, China's GTRI in 2001 actually increased by nearly 50% compared to its 1997 rate, which is in sharp contrast to either the nearly flat TRI changes or the 13% increase indicated by the weighted average tariff rate. This implies that prior to the WTO accession; China's high tariffs were imposed on those industries with relatively low tariff pass-through. Nevertheless all the trade restrictiveness measures dropped significantly after 2001 and exhibited similar dynamic pattern, confirming WTO's effectiveness in removing tariff barriers. We further breakdown the GTRI and show that the difference between GTRI and import-weighted tariff is mainly due to the variance of tariff and the covariance between tariffs and trade elasticities. Finally, we show GTRI differs from TRI since the former allows for upward-sloping foreign supply, implying an incomplete tariff pass-through which increased from 30% in 1997 to 51% in 2008.

Speaker biography

Dr Bo Chen is currently an Associate Professor of Economics and Associate Department Head in the Department of International Trade, Shanghai University of Finance and Economics. He earned his PhD from Simon Fraser University, MA from York University and BA from Huazhong University of Science and Technology, all in economics. His current research interests include international trade, open macroeconomics and applied econometrics. His research has appeared in leading publications including Economics Letters, Review of Development Economics and Review of International Economics.