The Influcence of Chinese Trade Policy on Automobile Assembly and Parts

35 Pages Posted: 26 Oct 2011

See all articles by Deborah L. Swenson

Deborah L. Swenson

University of California, Davis - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: October 25, 2011

Abstract

This paper analyzes the economic effects of content-based import tariffs China imposed on imported auto parts. While China’s policy penalized any firm that assembled cars with less than 60 percent Chinese content, the policy was most likely to affect foreign affiliated firms who were more likely to exceed the content ceiling. To assess whether foreign-affiliated firms differentially changed their input sourcing this paper uses Chinese product trade data for 1997 to 2009 which report trade transactions by firm ownership type. Compared with import transactions for other firms, the data show that foreign-affiliated firms appear to have mitigated the effects of the policy by reducing import transaction prices, and by reducing their import quantities on the extensive margin. While China’s content-based auto import trade policy was repealed in 2009 after China lost its dispute case at the WTO, the extraordinary growth in China’s global export of auto parts since 2005 suggests that China’s short term trade policy may have contributed to enduring effects in global supply chains.

Keywords: content-based tariff policy, imported intermediate inputs

JEL Classification: F100, F140, F200

Suggested Citation

Swenson, Deborah L., The Influcence of Chinese Trade Policy on Automobile Assembly and Parts (October 25, 2011). CESifo Working Paper Series No. 3615, Available at SSRN: https://ssrn.com/abstract=1949070 or http://dx.doi.org/10.2139/ssrn.1949070

Deborah L. Swenson (Contact Author)

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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