RECHERCHE ET ANALYSE: DOCUMENTS DE TRAVAIL

Exporting Under Trade Policy Uncertainty: Theory and Evidence

This paper appears in the WTO working paper series in the context of the WTO Essay Award Program 2011

Policy uncertainty can delay investment and reduce the response to policy change. I provide theoretical and novel quantitative evidence for these e ects by focusing on trade policy, a ubiquitous but often overlooked source of uncertainty, when a rm's cost of export market entry is sunk. While an explicit purpose of the World Trade Organization (WTO) is to secure long term market access, little theoretical and empirical work analyzes the value of WTO institutions for reducing uncertainty for prospective exporters. Within a dynamic model of heterogeneous rms, I show that trade policy uncertainty will delay the entry of exporters into new markets and make them less responsive to applied tari reductions. Policy instruments that reduce or eliminate uncertainty such as binding trade policy commitments at the WTO can increase entry even when applied protection is unchanged. I test the model using a disaggregated and detailed dataset of product level Australian imports in 2004 and 2006. I use the variation in tari s and binding commitments across countries, products and time, to construct model-consistent measures of uncertainty. The estimates indicate that lower WTO commitments increase entry. Reducing trade policy uncertainty is at least as e ective quantitatively as unilateral applied tari reductions for Australia. These results illuminate and quantify an important new channel for trade creation in the world trade system.

No: ERSD-2011-20

Auteur:

Kyle Handley — Stanford University

Date de rédaction: décembre 2011

Mots clés:

policy uncertainty, trade, World Trade Organization, bindings

Cotes JEL:

 

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Ce document est un document de travail et concerne donc des recherches en cours. Il témoigne de l'opinion personnelle des fonctionnaires ou des universitaires invités et est le produit de recherches professionnelles. Il n'est pas censé représenter la position ou les points de vue de l'OMC ou de ses Membres, ni la position officielle des fonctionnaires de l'OMC. Ses auteurs sont seuls responsables en cas d'erreur. Des exemplaires de ce document peuvent être obtenus auprès du Secrétariat de la division responsable, à l'adresse suivante: Division de la recherche et de l'analyse économiques, Organisation mondiale du commerce, rue de Lausanne 154, CH-1211 Genève 21, Suisse. Veuillez indiquer dans votre demande les cote et titre du document.

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