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Crisis Protectionism: The Observed Trade Impact

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  • Christian Henn
  • Brad McDonald

Abstract

This paper investigates how new discriminatory measures implemented since the start of the global financial crisis are affecting global trade flows. Newly available data on border measures and behind-the-border measures (for example, bailouts and subsidies) implemented through April 2010 are matched to monthly 4-digit bilateral trade data using a first-differenced gravity equation. The estimation strategy exploits within-product variation and utilizes extensive time-varying fixed effects and duad/tetrad ratio estimation to isolate as far as possible the impact of protectionist measures from that of other factors to estimate trade policy impacts. The estimates suggest that trade in country pairs subject to new border measures decreased by 5–8 percent relative to trade in the same product among pairs not subject to new measures. Identification of trade impacts of behind-the-border measures proves to be considerably more challenging, but, also for these measures, evidence points toward a negative impact, possibly of roughly the same magnitude. These results imply a decline in global trade of about 0.2 percent on account of crisis protectionism.

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  • Christian Henn & Brad McDonald, 2014. "Crisis Protectionism: The Observed Trade Impact," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 62(1), pages 77-118, April.
  • Handle: RePEc:pal:imfecr:v:62:y:2014:i:1:p:77-118
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    2. Georgios Georgiadis & Johannes Gräb, 2016. "Growth, Real Exchange Rates and Trade Protectionism since the Financial Crisis," Review of International Economics, Wiley Blackwell, vol. 24(5), pages 1050-1080, November.
    3. Gabriel Felbermayr & Luisa Kinzius & Erdal Yalcin, 2017. "Versteckter Protektionismus – Nichttarifäre Handelshemmnisse und ihre Folgen für den Internationalen Handel," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 91.
    4. Luisa Kinzius & Alexander Sandkamp & Erdal Yalcin, 2019. "Trade protection and the role of non-tariff barriers," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 155(4), pages 603-643, November.
    5. Yanfeng Lou & Yezhuang Tian & Kai Wang, 2020. "The Spillover Effect of US Industrial Subsidies on China’s Exports," Sustainability, MDPI, Open Access Journal, vol. 12(7), pages 1-12, April.
    6. Eduardo Gutiérrez Chacón & César Martín Machuca, 2019. "Tariff protectionist measures and Spanish goods exports," Economic Bulletin, Banco de España, issue DEC, pages 1-9.
    7. Peter A.G. van Bergeijk, 2019. "Deglobalization 2.0," Books, Edward Elgar Publishing, number 18560.

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