during this period through other trade policy instruments, such as those that we introduce below in Section 3.1.<sup>24</sup> A second strand examines the role of PTAs on changes to applied MFN tariffs, and whether preferential tariff liberalization serves as a ‘stumbling block’ or a ‘building block’ to future MFN applied tariff cuts (Bhagwati, 1991). Many of the PTAs described below in Section 2.3 also motivate 1993-2013 as being a useful period to study this question.

The evidence thus far of the impact of preferential tariff cuts on applied MFN tariff cuts has been mixed. Lim ̃ao (2006) and Karacaovali and Lim ̃ao (2008) examine the PTAs in effect as of the mid-1990s for the United States and European Union, respectively, and find stumbling block evidence that they significantly limited the MFN tariff cutting arising under the Uruguay Round. On the other hand, Estevaderordal, Freund and Ornelas (2008) present building block evidence from a set of Latin American countries that cut tariffs preferentially via free trade agreements in the 1990s and followed those up by then reducing their applied MFN tariffs.<sup>25</sup> A third strand seeks to utilize any (plausibly) _exogenous_ episodes of MFN applied tariff liberalization so as to exploit the unexpected nature of the shock. One episode worth highlighting is India’s unilateral liberalization of the early 1990s (see again Table 2), which is an environment that has turned out to be a useful laboratory for conducting this sort of research.

Topalova and Khandelwal (2011) have examined the environment and empirically established that the MFN tariffs that India applied during the late 1990s were unrelated to standard politicaleconomy determinants of its trade policy.<sup>26</sup> This important empirical result established India’s IMFmandated tariff cuts associated with its 1991-92 macroeconomic crisis and stand-alone agreement as an environment suited to assess a number of important research questions related to the impact of globalization on incentives and micro-level economic activity.<sup>27</sup>

> 24To foreshadow our discussion below, Bown and Crowley (2013a, 2014) consider the time-varying constraints on a country’s applied MFN tariffs imposed by WTO tariff binding commitments as a contributing factor behind the substitution toward use of other trade policies in response to aggregate-level fluctuations, including during the 20082009 crisis. On the other hand, another contributing explanation for the lack of responsiveness of import protection to macroeconomic shocks may be the lack of theoretical guidance for estimation, as there is not a robust theoretical literature linking business cycles and import protection. An exception is Bagwell and Staiger (2003).

> 25See also Lim ̃ao (2007) for a theoretical motivation for the US results, as well as additional empirical evidence from the ASEAN Free Trade Agreement (described below) from Calvo-Pardo, Freund and Ornelas (2011) and the Central American Free Trade Agreement-Dominican Republic (CAFTA-DR) from Tovar (2012).

> 26Bown and Tovar (2011) use an alternative approach and find supporting evidence of this result by showing how India’s applied MFN tariffs set in 1990 are consistent with the structural framework of the Grossman and Helpman (1994) model, but that the MFN applied tariffs in 2000-2002 then become inconsistent with the model.

> 27The Indian empirical environment in the 1990s has been used to study the impact of globalization on schooling and human capital acquisition (Edmonds, Pavcnik and Topalova, 2010), firm productivity (Krishna and Mitra 1998; Topalova and Khandelwal, 2011), use of intermediate inputs (Goldberg, Khandelwal, Pavcnik and Topalova, 2010a) product switching (Goldberg, Khandelwal, Pavcnik and Topalova, 2010b), and customs evasion (Mishra, Subramanian, and Topalova, 2008), amongst others. Much of this literature is reviewed in detail in Goldberg and Pavcnik (forthcoming).

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