A Study On Bilateral Tariff Setting Between China And Canada Under The Global Value Chains

As of 2018,China and Canada have conducted four rounds of exploratory discussions on the FTA negotiations,and it is possible to open formal tariff negotiations on the FTA at any time.At the same time,the formation of global value chains is reshaping the consequences of tariffs and other border barriers.The final formulation of bilateral tariffs should be reconsidered from the perspective of global value chains.In the view of traditional trade,the establishment of higher tariffs can protect domestic enterprises,but the emergence of global value chains makes the final commodity more and more integrated by foreign and domestic input,through the supply network to cross the border and the company's tradition.At the border,a country's products are used by other countries,and the country is also using other countries' products,and setting higher tariffs may be counterproductive.The formulation of tariffs should not only take into account its role in protecting the domestic market,but also consider its impact on China's interests in the global value chains.High or low tariffs are not optimal,and indiscriminate tariffs are not reasonable.From the perspective of global value chains,this thesis first constructs a government's objective function.Through theoretical deduction,it is found that a country participates in the global value chains in the form of added value mainly through factor income and political influence.After the goal function is maximized,it can be found that the domestic added value and the foreign added value are negatively correlated with the bilateral tariff.In order to further confirm this result,this thesis uses the bilateral tariffs of China and Canada and the value of the value chains of China and Canada calculated by the World Input-Output Table,and selects the data from 2000 to 2009 for regression analysis.and use Tobit regression and instrumental variables for robustness test,it is concluded that the higher the bilateral value chains attachment degree between the two countries,the lower the bilateral tariff set.Therefore,as the level of interaction between China and Canada becomes higher and higher,bilateral tariffs should be a downward trend,and for products with higher levels of interaction between the two countries,lower tariffs should be established,and for products with lower levels of interaction,higher tariffs should be established.At the same time,this thesis analyzes the added value and tariffs by industry,and finds that the value chains have a negative impact on tariffs.The higher the degree of bilateral value chains,the greater the negative impact of the tariff on the added value.More low tariffs should be established for such products,such as textiles and leather,machinery and equipment,and transportation equipment.In industries with a low level of bilateral value chains,tariffs are not significantly affected by added value,including manufacturing and recycling.The government should impose higher tariffs on such products to expand tax revenues.Significantly reduce the factor income and political impact of value-added while increasing government revenue.In addition,this thesis also analyzes the bilateral tariffs on the importance of trade and industry concentration.The study found that the stronger the trade partners,the lower tariffs will be set to maintain trade volume.At the same time,the higher the Herfindahl index,the lower the cost of the joint lobbying government,the more able to convince the government to reduce bilateral tariffs to maintain its export volume and market capacity.Therefore,in formulating the optimal bilateral tariffs,it is necessary not only to consider the degree of value chains interaction between the two countries,but also to take into account the characteristics of various industries and to formulate bilateral tariffs more comprehensively.