Policy Uncertainty, Trade, and Welfare: Theory and Evidence for China and the United States
Open accessAbstract
We examine the impact of policy uncertainty on trade, prices, and real income through firm entry investments in general equilibrium. We estimate and quantify the impact of trade policy on China's export boom to the United States following its 2001 WTO accession. We find the accession reduced the US threat of a trade war, which can account for over one-third of that export growth in the period 2000– 2005. Reduced policy uncertainty lowered US prices and increased its consumers' income by the equivalent of a 13-percentage-point permanent tariff decrease. These findings provide evidence of large effects of policy uncertainty on economic activity and the importance of agreements for reducing it. (JEL D72, F13, F14, O19, P33)
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Trade liberalization reduced trade-policy uncertainty due to binding commitments in GATT/WTO and regional trade agreements.
“it also reduced trade -policy uncertainty due to the binding commitments that countries made when entering the GATT/WTO or signing regional trade agreements.”
From De-Globalisation? Global Value Chains in the Post-COVID-19 Age (2020) · cites this paper as Handley and Limao, 2017
The opening discussion and Conclusion report that China’s WTO accession reduced trade-policy uncertainty, while “D. Outcomes and Policy Experiments” describes WTO tariff bindings as commitments. The paper also discusses how agreements can make trade policy more predictable, but the passages do not establish the claimed reduction for regional trade agreements specifically. Page numbers are unavailable in our copy. (LLM, conf=0.84)
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- Authors
- Handley, K., & Limão, N.
- Affiliations
- University of Michigan (US)
- University of Maryland, College Park (US)
- Venue
- American Economic Review
- Publisher
- American Economic Association
- Published
- 2017-09-01
- Volume
- 107
- Issue
- 9
- Pages
- 2731-2783
- ISSN
- 0002-8282 (ISSN-L)
- OpenAlex
- W2752061982
- Cited by
- 988
- References
- 2
- Citations by year
- 2026: 216 · 2025: 184 · 2024: 137 · 2023: 107 · 2022: 101 · 2021: 80 · 2020: 74 · 2019: 43 · 2018: 27 · 2017: 6 · 2016: 7 · 2015: 4 · 2014: 1 · 2012: 1
- FWCI
- 89.40
- Type
- journal article
- Language
- en
- Open access
- bronze
- doi.org
- Locations
- American Economic Review (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Global trade and economics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Market Dynamics and Volatility
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Monetary Policy and Economic Impact
- Keywords
- policy uncertainty, trade policy, WTO accession, US-China trade relations, export boom, firm entry, general equilibrium, consumer welfare, price, tariffs, trade agreements
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