Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/189858 
Year of Publication: 
2017
Series/Report no.: 
Staff Report No. 817
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
China's rapid rise in the global economy following its 2001 World Trade Organization (WTO) entry has raised questions about its economic impact on the rest of the world. In this paper, we focus on the U.S. market and potential consumer benefits. We find that the China trade shock reduced the U.S. manufacturing price index by 7.6 percent between 2000 and 2006. In principle, this consumer welfare gain could be driven by two distinct policy changes that occurred with WTO entry. The first, which has received much attention in the literature, is the United States granting permanent normal trade relations (PNTR) to China, effectively removing the threat of China facing very high tariffs on its exports to the United States. A second, new channel we identify is China reducing its own input tariffs. Our results show that China's lower input tariffs increased its imported inputs, boosting Chinese firms' productivity and their export values and varieties. Lower input tariffs also reduced Chinese export prices to the U.S. market. In contrast, PNTR had no effect on Chinese productivity or export prices, but did increase Chinese entry into the U.S. export market. We find that at least two-thirds of the China WTO effect on the U.S. price index of manufactured goods was through China lowering its own tariffs on intermediate inputs.
Subjects: 
China
WTO entry
input tariffs
price index
consumers
JEL: 
F12
F13
F14
Document Type: 
Working Paper

Files in This Item:
File
Size
614.46 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.