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Import protection, business cycles, and exchange rates: evidence from the Great Recession

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  • Chad Bown
  • Meredith Crowley

Abstract

This paper uses highly detailed, quarterly data for five major industrialized economies to estimate the impact of> macroeconomic fluctuations on import protection policies over 1988:Q1–2010:Q4. First, estimates on a pre-Great Recession sample of data provide evidence of two key relationships. We confirm that appreciations in bilateral real exchange rates lead to substantial increases in antidumping and related forms of import protection: e.g., a 4 percent appreciation results in 60–90 percent more products being subject to import protection. We also provide evidence of a previously overlooked result that policy-imposing countries historically imposed such bilateral import restrictions on trading partners that were going through periods of weak economic growth.> Second, we use the model to then provide the first estimates that link macroeconomic fluctuations to a change in policy-imposing behavior during the Great Recession so as to explain the realized protectionist response. During the Great Recession, the U.S. and other policy-imposing economies became less responsive to exchange rate appreciations. Furthermore, the U.S. and other economies “switched” from their historical behavior and shifted implementing new import protection away from those trading partners that were contracting and toward those experiencing economic growth. In a final exercise, we document how the model’s estimates imply that a 9–20 percent appreciation of China's real exchange rate vis-à-vis the U.S. dollar during the sample period would allow for China’s exporters to have received the "average" import protection treatment under antidumping that the U.S. imposed against other countries.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-2011-16.

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Date of creation: 2011
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Handle: RePEc:fip:fedhwp:wp-2011-16

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Related research

Keywords: Antidumping duties ; Business cycles ; Foreign exchange rates ; Recessions;

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References

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  1. Meredith Crowley, 2006. "Why are safeguards needed in a trade agreement?," Working Paper Series WP-06-06, Federal Reserve Bank of Chicago.
  2. Chad P. Bown, 2007. "China's WTO Entry: Antidumping, Safeguards, and Dispute Settlement," NBER Working Papers 13349, National Bureau of Economic Research, Inc.
  3. Meredith A. Crowley, 2010. "Split Decisions in Antidumping Cases," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 68.
  4. Chad P. Bown, 2011. "Taking Stock of Antidumping, Safeguards and Countervailing Duties, 1990–2009," The World Economy, Wiley Blackwell, vol. 34(12), pages 1955-1998, December.
  5. Kee, Hiau Looi & Neagu, Cristina & Nicita, Alessandro, 2010. "Is protectionism on the rise ? assessing national trade policies during the crisis of 2008," Policy Research Working Paper Series 5274, The World Bank.
  6. Meredith Crowley, 2007. "Cyclical dumping and U.S. antidumping protection: 1980-2001," Working Paper Series WP-07-21, Federal Reserve Bank of Chicago.
  7. BOWN, CHAD P. & McCULLOCH, RACHEL, 2003. "Nondiscrimination and the WTO Agreement on Safeguards," World Trade Review, Cambridge University Press, vol. 2(03), pages 327-348, November.
  8. Vandenbussche, Hylke & Viegelahn, Christian, . "European Union: No Protectionist Surprises," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/333779, Katholieke Universiteit Leuven.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. The Great Recession and Trade Protectionism: What Went Right?
    by Edward Alden in Renewing America on 2012-05-01 18:47:40
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Cited by:
  1. Bown, Chad P. & Crowley, Meredith A., 2013. "Emerging economies, trade policy, and macroeconomic shocks," Policy Research Working Paper Series 6315, The World Bank.
  2. Marc Auboin & Michele Ruta, 2012. "The Relationship between Exchange Rates and International Trade: A Literature Review," CESifo Working Paper Series 3868, CESifo Group Munich.
  3. Chad P. Bown, 2004. "How Different Are Safeguards from Antidumping? Evidence from US Trade Policies Toward Steel," Econometric Society 2004 North American Summer Meetings 434, Econometric Society.
  4. Rudolfs Bems & Robert C. Johnson & Kei-Mu Yi, 2012. "The Great Trade Collapse," NBER Working Papers 18632, National Bureau of Economic Research, Inc.

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