Phase out tariffs, phase in trade?

Besedeš, T., Kohl, T. & Lake, J., Apr-2019, CESifo, 63 p. (CESifo Working Paper Series; no. 7614).

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What causes U.S. trade with Mexico and Canada to continue growing faster, for up to a decade, relative to countries with which the U.S. does not have a free trade agreement? Baier and Bergstrand (2007) suggest that tariff phase-out and delayed pass-through of tariffs into import prices could cause such prolonged differential import growth. We examine how tariff cuts negotiated under the Canada-US Free Trade Agreement and the North American Free Trade Agreement (NAFTA) affected U.S. import growth in 1989-2016 using detailed product-level data on tariff phase-out in the original treaties. We find essentially no evidence for the tariff phase-out or delayed pass through explanations. Rather, we find evidence for an important role played by NAFTA tariff cuts reducing the impacts of frictions at various extensive margins.
Original languageEnglish
Number of pages63
Publication statusPublished - Apr-2019

Publication series

NameCESifo Working Paper Series

ID: 80654152