The Impact of Tariff Reduction of Manufacturing Industry on the Participation of Global Value Chains in China

After China's accession to WTO in 2001, it has substantially reduced its own import tariffs, and since then the participation of China’s various industries in global value chains have all deepened steadily(GVC afterward). The traditional wisdom about import tariff is that proper levels of tariff could protect domestic fragile industries from foreign fierce competitions but could have negative consequences like limited GVC participations. Will the tariffs reduction a bad news to this protected industries or a help to promote their GVC participations, i.e., backward or forward linkage? Our empirical studies shed some light on this. Based on the panel data of GVC participation and tariffs rate of 16 industries from 2000 to 2014 in China, this paper analyzes the effect and mechanism of tariff reduction of intermediate and final goods on manufacturing participation in GVC, by using two-way fixed effect panel regression. The results show that the tariff reduction is beneficial to China's manufacturing industry's participation in GVC. And tariff reductions have different degrees of beneficial effects on high-tech and general manufacturing industries