The Layers of the IT Agreement's Trade Impact

The WTO's plurilateral Information Technology Agreement (ITA) reduced tariffs to zero on many IT products. This paper presents a comprehensive study of its trade impacts by incorporating recent insights from both the global value chain (GVC) and time in trade literatures.

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Inserting tariffs directly into the gravity equation breaks the ITAs impact down into four layers. Import demand elasticities are found to be non-linear: Tariff reduction (layer 1) has relatively small impacts, while complete tariff elimination (layer 2) has high impacts, especially for intermediate goods. Beyond that, ITA accession has positive non-tariff effects on both imports (layer 3) and exports (layer 4). These commitment effects suggest that higher trade policy certainty affects investment and sourcing decisions in favour of signatories: Their ITA exports performed better relative to other ICT and machinery exports, unlike non-members. But "passive signatories" — which joined mainly as a by-product of a larger policy objective — reaped the most benefits. Featuring a smaller ITA sector upon accession, their final good exports increased also in absolute terms due to downstream GVC integration. However, such impacts are strongly heterogeneous with respect to countries' geographical remoteness, education levels, business environment and institutions. China stands out with especially strong post-accession export increases, also extending to intermediate goods.

No: ERSD-2015-01

Auteurs: Christian Henn and Arevik Gnutzmann-Mkrtchyan

Date de rédaction: février 2015

Mots clés:

tariffs, trade policy certainty, value chains, fragmentation, WTO Information Technology Agreement, gravity equation, product-level trade, non-linearity.

Cotes JEL:

F13, F14, L63.

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Avertissement

Ce document est un document de travail et concerne donc des recherches en cours. Les opinions qui y sont exprimées sont celles de ses auteurs. Elles ne sont pas censées représenter la position ou les opinions de l’OMC ou de ses Membres et sont sans préjudice des droits et obligations des Membres dans le cadre de l'Organisation. Les auteurs sont seuls responsables en cas d’erreur.

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