Trade Policy Uncertainty and Exports: Evidence from China’s WTO Accession

To understand the effects of trade policy uncertainty on firm-level export decisions, we study firm-product data on Chinese exports to the U.S. in the years surrounding China’s 2001 WTO accession. Following predictions based on a model of heterogeneous firms, we provide empirical evidence that product-level tariff uncertainty reduction spurred a notable reallocation of export activities across firms, largely due to extensive margin entries and exits. In addition we document accompanying changes in prices and quality that coincided with this reallocation: firms that provided higher quality products at lower prices entered the U.S. export market, while firms that had higher prices and provided lower quality products exited. JEL-Code: F130, F140, D810, F510. Ling Feng School of Finance Shanghai University of Economics and Finance & Shanghai Institute of International Finance Center Shanghai, 200433, China [email protected] Zhiyuan Li School of Economics Shanghai University of Economics and Finance & Key Laboratory of Mathematical Economics (SUFE) Shanghai, 200433, China [email protected] Deborah L. Swenson Department of Economics University of California, Davis One Shields Avenue USA 95616-8578 Davis CA [email protected]