China & World Economy / 123–142, Vol. 28, No. 2, 2020

How Will the Implementation of Zero Tariffs Affect Employment in China?

Qingyi Su, Chengwei Zang

Abstract

This paper studies the employment effect of China’s possible implementation of zero tariffs by comparing China’s most-favored-nation tariffs and the tariff schedules of China’s signed free trade agreements (FTAs) with the tariff concessions in a typical high-standard FTA. It finds that there is a large gap between China’s current tariff status and a high-standard FTA, and the implementation of zero tariffs in China would have a significant negative impact on employment in some industries. However, the employment effect of implementing zero tariffs is heterogeneous. Analysis at the industrial level shows that, although employment would drop in a few industries as a result of the implementation of zero tariffs, more jobs would be created in most industries. The overall employment effect of a zero tariff policy would be positive, creating an estimated 8.05 million jobs in China. Therefore, China should consider the adjustment costs brought by the labor movement in different industries and introduce relevant policies to deal with the employment shocks caused by zero tariffs.