Social Sciences in China (Chinese Edition)

No.7, 2020

The Inhibitory Effect of Global Value Chain Embedment on Trade Protection: From the Perspective of Economic Fluctuation

(Abstract)

Tang Yihong and Zhang Pengyang

Trade protection always emerges and spreads alongside economic fluctuations, so inhibiting economic fluctuations has become an important means of curbing trade protection. Due to its formation of an association of interests, the role of the global value chain (GVC) in reducing global economic fluctuation has attracted much attention. On the basis of an optimal tariff model including economic fluctuation parameters, we conducted an empirical test of the inhibitory effect of GVC embeddedness on trade protection from the perspective of economic fluctuation. We found that GVC embedment has an inhibitory effect on trade protection and that the inhibition of economic fluctuations is an important mechanism by which GVC embedment restrains trade protection. The inhibiting effect on trade protection exerted through this mechanism as a significant effect in GVC leading countries; however, this effect is not significant in GVC follower countries, where it may even aggravate economic instability and intensify trade protection. However, as a country improves its GVC leading ability, the effect of GVC embedment in restraining trade protection by smoothing economic fluctuations gradually becomes evident.