Traders' Dilemma : Developing Countries' Response to Trade Disputes

Devarajan, Shantayanan ; Go, Delfin S. ; Lakatos, Csilla ; Robinson, Sherman ; Thierfelder, Karen

World Bank, Washington, DC

关键词: TRADE;    CGE MODEL;    TRADE DISPUTES;    GENERAL AGREEMENT ON TARIFFS AND TRADE;    TRADE WAR;   

DOI  :  10.1596/1813-9450-8640
RP-ID  :  WPS8640

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

If trade tensions between the UnitedStates and certain trading partners escalate into afull-blown trade war, what should developing countries do?Using a global, general-equilibrium model, this paper firstsimulates the effects of an increase in U.S. tariffs onimports from all regions to about 30 percent (the averagenon-Most Favored Nation tariff currently applied to importsfrom Cuba and the Democratic Republic of Korea) andretaliation in kind by major trading partners—the EuropeanUnion, China, Mexico, Canada, and Japan. The paper thenconsiders four possible responses by developing countries tothis trade war: (i) join the trade war; (ii) do nothing;(iii) pursue regional trade agreements (RTAs) with allregions outside the United States; and (iv) option (iii) andunilaterally liberalize tariffs on imports from the UnitedStates. The results show that joining the trade war is theworst option for developing countries (twice as bad as doingnothing), while forming RTAs with non-U.S. regions andliberalizing tariffs on U.S. imports (“turning the othercheek”) is the best. The reason is that a trade war betweenthe United States and its major trading partners createsopportunities for developing countries to increase theirexports to these markets. Liberalizing tariffs increasesdeveloping countries’ competitiveness, enabling them tocapitalize on these opportunities.