Decision-making Process And Determinants Of China’s Trade Policy

Political economy of trade policy focuses on the interacction between government, voters and interest groups during the process of decision-making. The voters and interest groups influence the decision-making process respectively through transmissing voting information and political contributions. Whether direct democracy mechanism represented by’median voter model’or the opposite one by ’protection for sale model’, trade policies of which both reflect the will at the extent of the public and interest groups. The difference between these mechannisms lies in that the indirect democracy leave more spaces and channels for interest groups organizing activities. At the meanwhile, rent-seeking for government is profitable and she could achieve self-interestedness through balancing the general welfare.and political contributions. Therefore it can be seen that mainstream models of political economy are based on specific social rules. They depend on the west social system, and do not meet the characteristics of the countries with different ideology and democratic features like China.Now political economy of China’s trade policy mainly focuses on two aspects: one is empirical analysis for simplification of the theory hypothesis and the other is empirical analysis of developed countries’trade policies to China. With the socialism market-economy advancing, China participates in trade negotiation and cooperation actively and trade and investment activities in China have become freely day by day. So the benefits of industrial groups and government department have been emerging It is no doubt that the model or theory hypotheses posed the feature of centralized system confronts challenges. In the other side, tariff has been replaced by the measures of trade remedy and industry upgrading in the framework of WTO and becoming the field of trade competition among members. China has reduced the tariff greatly in order to fulfill the commitments of joining WTO and eventually cannot avoid competing in this non-tariff field. Currently minority of empirical analysis in Chnia refers to cases of administrative protection. Based on theoretical framework of trade policy’s political economy, this dissertation investigates the new features of decision mechanism for economy policy in China and intended to do empirical analysis for tariff and anti-dumping measures, so as to explore the rules of decision-making in China and offer some advices about trade policy.Firstly, this dissertation analyzed the factors of WTO rules and newly relationship between Communism Party and our government which were external constraint of decision-making process. And then it examined the players and their power comparison in the process, who were central government, authorities of economy activities and interest groups. It is found that principal-agent relationship exists between Communism Party and our government after joining WTO. The regulation-capture relationship between authorities and its descendants is formed. So, the decision-making characterized by all players together participating is subsititute for centralized system increasingly.Secondly, it constructed a data set of simple average industrial tariff panel samples from1996to2008, which cover thirty eight industries and thirty six trade partners. Through the regressor of dynamic panel model and panel simultaneous model, it examines the influence of industry characters, industry economy security and international cooperation to industrial tariff level. The conclusion can be got that the industry with high capital stock per person and high added value has strong capacity of persuading and can get high tariff protection.Thirdly, it constructs panel data sample which include thirty six partners from1996to2009in the empirical analysis of anti-dumping measures. Using discrete choice regressor, one hundred and seventy nine anti-dumping cases is analyzed. This chapter is based on national interest hypothesis, interest group hypothesis and the two mixture effects. It is also can be found that national interest is the main reason in initiating phase, and the industrial added value, international payment and anti-dumping measures of other countries used have a positive impact on anti-dumping initiation of our country. Oberserving the cases of which imposed anti-dumping duty, it has found that industry lobbying makesa a great influence on administrative ruling of anti-dumping. The foreign enterprises have stronger capacity of lobbying than state-owned enterprise.Finally, it evaluates the correlation between bargaining powers of upstream and downstream industries and trade protection in intermediate products as well as their bargaining power using two-tier stochastic model. The result show that the intermediate industry toke major effect on pricing, which makes the applied tariff level higher than beenchmark tariff. But the FTA and export competitiveness impact bargaining effect greatly and evenly make the tariff of intermediate products lower than the benchmark.In summary, China’s foreign trade policies reflect national interest as well as demand of interest groups. The trade policy producing is the result of mutual effect between central government, authorities of economy activities and interest groups.