Decomposing this total effect into a price and variety component, we find that two-thirds of the aggregate effect comes from lower prices. All of this price effect is due to China lowering its own input tariffs, which results in lower prices of Chinese goods exported to the US and also lower prices of competitor firms in the US, both foreign and domestic. These lower competitor prices arise due to US firms accessing cheaper intermediate inputs from China, which lowers their own marginal costs; lower markups of competitor firms due to competition from China; and due to exit of the more inefficient firms that were unable to compete with China.
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‘Trade facilitation deal’
was marketed by developed countries as a progressive and much needed deal for good of all type of countries. It is being said that it will boost up Global GDP by $ 1 Trillion and will add millions of new job. This argument has a little or no empirical backing and it is feared that western supplier will invade domestic markets of developing and underdeveloped countries. ‘Trade facilitation’ along with ‘special package’ is like saying that gains of developed countries will be so big, that losses of under-developed countries will be lucratively compensated by them.