Trade to aid: EU's temporary tariff waivers for flood-hit Pakistan
In this paper, we study the effectiveness of the first large-scale unilateral trade concessions as foreign aid for disaster relief, i.e., EU tariff waivers on goods heavily exported by Pakistan, which was severely hit by the 2010 floods. Using a triple-difference approach and a synthetic control approach, we find that the tariff waivers substantially increased Pakistan's exports to the EU. The export hike occurred within a few months after the waivers became effective, and did not significantly depress exports by competing countries. While the export boost brought greater employment opportunities in the tariff-waived industries, we find little evidence that the greater labor demands from trade were particularly beneficial to the areas most affected by the floods. Our findings suggest that trade policy may complement traditional means of foreign aid-but trade concessions alone may be inadequate, as the areas most affected by natural disasters may be poorly targeted.
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