Traders' Dilemma : Developing Countries' Response to Trade Disputes
If trade tensions between the United States and certain trading partners escalate into a full-blown trade war, what should developing countries do? Using a global, general-equilibrium model, this paper first simulates the effects of an increase in...
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World Bank, Washington, DC
2018
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| Online Access: | http://documents.worldbank.org/curated/en/115171541615454756/Traders-Dilemma-Developing-Countries-Response-to-Trade-Disputes http://hdl.handle.net/10986/30846 |
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okr-10986-308462021-11-15T12:21:46Z Traders' Dilemma : Developing Countries' Response to Trade Disputes Devarajan, Shantayanan Go, Delfin S. Lakatos, Csilla Robinson, Sherman Thierfelder, Karen TRADE CGE MODEL TRADE DISPUTES GENERAL AGREEMENT ON TARIFFS AND TRADE TRADE WAR REGIONAL TRADE TRADE LIBERALIZATION If trade tensions between the United States and certain trading partners escalate into a full-blown trade war, what should developing countries do? Using a global, general-equilibrium model, this paper first simulates the effects of an increase in U.S. tariffs on imports from all regions to about 30 percent (the average non-Most Favored Nation tariff currently applied to imports from Cuba and the Democratic Republic of Korea) and retaliation in kind by major trading partners—the European Union, China, Mexico, Canada, and Japan. The paper then considers four possible responses by developing countries to this trade war: (i) join the trade war; (ii) do nothing; (iii) pursue regional trade agreements (RTAs) with all regions outside the United States; and (iv) option (iii) and unilaterally liberalize tariffs on imports from the United States. The results show that joining the trade war is the worst option for developing countries (twice as bad as doing nothing), while forming RTAs with non-U.S. regions and liberalizing tariffs on U.S. imports (“turning the other cheek”) is the best. The reason is that a trade war between the United States and its major trading partners creates opportunities for developing countries to increase their exports to these markets. Liberalizing tariffs increases developing countries’ competitiveness, enabling them to capitalize on these opportunities. 2018-11-12T21:29:24Z 2018-11-12T21:29:24Z 2018-11 Working Paper http://documents.worldbank.org/curated/en/115171541615454756/Traders-Dilemma-Developing-Countries-Response-to-Trade-Disputes http://hdl.handle.net/10986/30846 English Policy Research Working Paper;No. 8640 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper |
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Digital Repository |
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Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
| language |
English |
| topic |
TRADE CGE MODEL TRADE DISPUTES GENERAL AGREEMENT ON TARIFFS AND TRADE TRADE WAR REGIONAL TRADE TRADE LIBERALIZATION |
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TRADE CGE MODEL TRADE DISPUTES GENERAL AGREEMENT ON TARIFFS AND TRADE TRADE WAR REGIONAL TRADE TRADE LIBERALIZATION Devarajan, Shantayanan Go, Delfin S. Lakatos, Csilla Robinson, Sherman Thierfelder, Karen Traders' Dilemma : Developing Countries' Response to Trade Disputes |
| relation |
Policy Research Working Paper;No. 8640 |
| description |
If trade tensions between the United
States and certain trading partners escalate into a
full-blown trade war, what should developing countries do?
Using a global, general-equilibrium model, this paper first
simulates the effects of an increase in U.S. tariffs on
imports from all regions to about 30 percent (the average
non-Most Favored Nation tariff currently applied to imports
from Cuba and the Democratic Republic of Korea) and
retaliation in kind by major trading partners—the European
Union, China, Mexico, Canada, and Japan. The paper then
considers four possible responses by developing countries to
this trade war: (i) join the trade war; (ii) do nothing;
(iii) pursue regional trade agreements (RTAs) with all
regions outside the United States; and (iv) option (iii) and
unilaterally liberalize tariffs on imports from the United
States. The results show that joining the trade war is the
worst option for developing countries (twice as bad as doing
nothing), while forming RTAs with non-U.S. regions and
liberalizing tariffs on U.S. imports (“turning the other
cheek”) is the best. The reason is that a trade war between
the United States and its major trading partners creates
opportunities for developing countries to increase their
exports to these markets. Liberalizing tariffs increases
developing countries’ competitiveness, enabling them to
capitalize on these opportunities. |
| format |
Working Paper |
| author |
Devarajan, Shantayanan Go, Delfin S. Lakatos, Csilla Robinson, Sherman Thierfelder, Karen |
| author_facet |
Devarajan, Shantayanan Go, Delfin S. Lakatos, Csilla Robinson, Sherman Thierfelder, Karen |
| author_sort |
Devarajan, Shantayanan |
| title |
Traders' Dilemma : Developing Countries' Response to Trade Disputes |
| title_short |
Traders' Dilemma : Developing Countries' Response to Trade Disputes |
| title_full |
Traders' Dilemma : Developing Countries' Response to Trade Disputes |
| title_fullStr |
Traders' Dilemma : Developing Countries' Response to Trade Disputes |
| title_full_unstemmed |
Traders' Dilemma : Developing Countries' Response to Trade Disputes |
| title_sort |
traders' dilemma : developing countries' response to trade disputes |
| publisher |
World Bank, Washington, DC |
| publishDate |
2018 |
| url |
http://documents.worldbank.org/curated/en/115171541615454756/Traders-Dilemma-Developing-Countries-Response-to-Trade-Disputes http://hdl.handle.net/10986/30846 |
| _version_ |
1764473004575686656 |