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Import protection, business cycles, and exchange rates : evidence from the great recession

  • Bown, Chad P.
  • Crowley, Meredith A.

This research estimates the impact of macroeconomic fluctuations on import protection policies over 1988:Q1-2010:Q4 for five industrialized economies -- the United States, European Union, Australia, Canada and South Korea. There is evidence of a strong countercyclical trade policy response in the pre-Great Recession period of 1988:Q1-2008:Q3 during which increases in domestic unemployment rates, real appreciations in bilateral exchange rates, and declines in the GDP growth rates of bilateral trading partners led to substantial increases in new temporary trade barriers. It then applies this pre-Great Recession empirical model to realized macroeconomic data from 2008:Q4-2010:Q4 and find it predicts a surge of new import protection during the Great Recession -- e.g., for the US and EU, the model predicts new trade barriers would cover an additional 15 percentage points of nonoil imports, well above the baseline level of 2-3 percent of import coverage immediately preceding the crisis. Finally, the research examines why the realized trade policy response differed from model predictions. While exchange rate movements played an important role in limiting new import protection during the Great Recession, there is also evidence of one particularly important change in trade policy responsiveness; i.e., in this period, governments refrained from imposing new temporary trade barriers against foreign trading partners experiencing their own weak or negative economic growth.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6038.

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Date of creation: 01 Apr 2012
Date of revision:
Handle: RePEc:wbk:wbrwps:6038
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  2. Andrew K. Rose, 2012. "Protectionism Isn't Counter‐Cyclic (anymore)," NBER Working Papers 18062, National Bureau of Economic Research, Inc.
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  13. Chad Bown, 2013. "How Different Are Safeguards from Antidumping? Evidence from US Trade Policies Toward Steel," Review of Industrial Organization, Springer, vol. 42(4), pages 449-481, June.
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  18. Hillman, Arye L, 1982. "Declining Industries and Political-Support Protectionist Motives," American Economic Review, American Economic Association, vol. 72(5), pages 1180-87, December.
  19. Bown, Chad P., 2010. "Taking stock of antidumping, safeguards, and countervailingduties, 1990-2009," Policy Research Working Paper Series 5436, The World Bank.
  20. Kyle Bagwell & Robert W. Staiger, 1989. "A Theory of Managed Trade," Discussion Papers 801, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  21. Kyle Bagwell & Robert W. Staiger, 2006. "What Do Trade Negotiators Negotiate About? Empirical Evidence from the World Trade Organization," NBER Working Papers 12727, National Bureau of Economic Research, Inc.
  22. Meredith A. Crowley, 2007. "Cyclical dumping and U.S. antidumping protection: 1980-2001," Working Paper Series WP-07-21, Federal Reserve Bank of Chicago.
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  24. 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.
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  26. Robert M. Feinberg, 2005. "U.S. Antidumping Enforcement and Macroeconomic Indicators Revisited: Do Petitioners Learn?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 141(4), pages 612-622, December.
  27. Chad P. Bown, 2007. "China's WTO Entry: Antidumping, Safeguards, and Dispute Settlement," NBER Working Papers 13349, National Bureau of Economic Research, Inc.
  28. Meredith A. Crowley, 2006. "Why are safeguards needed in a trade agreement?," Working Paper Series WP-06-06, Federal Reserve Bank of Chicago.
  29. Trefler, Daniel, 1993. "Trade Liberalization and the Theory of Endogenous Protection: An Econometric Study of U.S. Import Policy," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 138-60, February.
  30. Christian Broda & Nuno Limao & David E. Weinstein, 2008. "Optimal Tariffs and Market Power: The Evidence," American Economic Review, American Economic Association, vol. 98(5), pages 2032-65, December.
  31. Ludema, Rodney D & Mayda, Anna Maria, 2011. "Canada: No Place Like Home for Antidumping," CEPR Discussion Papers 8389, C.E.P.R. Discussion Papers.
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  33. Crowley Meredith A., 2010. "Split Decisions in Antidumping Cases," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-26, July.
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