Protectionist Responses to the Crisis: Damage Observed in Product-Level Trade
IMF Working Papers, June 1, 2011
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Bibliographic details
- Authors: Brad J. McDonald, Christian Henn
- Published: June 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455265442.001
Summary and methodology
- The paper matches data on behind-the-border measures (e.g., bailouts and subsidies) and border measures implemented through April 2010 to monthly HS 4-digit bilateral trade data.
- Estimation strategy: first-differenced gravity equation and time-varying fixed effects to disentangle the impact of new discriminatory measures.
Key empirical findings
- Trade in exporter-importer pairs subject to new measures decreased by 5 to 8 percent relative to trade in the same product among pairs not subject to new measures.
- Product-level results imply global trade declines at the aggregate level of about 0.2 percent, or $30-35 billion a year.
- These aggregate figures would be higher, if one third of measures had not been excluded due to incomplete data.
- Behind-the-border measures are found to have been more harmful than border measures at the product level.
- Among border measures, impacts tend to be higher for less transparent measures.
- Advanced countries are found to be responsible for 2/3 of the trade decline due to crisis protectionism, but their exports also absorbed 2/3 of this decline.
- Measures taken in the first nine months after the Lehman collapse were most harmful and likely continue to constitute a drag on trade.
Disaggregation and dimensions analyzed
- By measure type: behind-the-border vs border measures (behind-the-border more harmful).
- By transparency: less transparent border measures show higher impacts.
- By country group: advanced countries account for 2/3 of the observed trade decline and absorb 2/3 of the decline in exports.
- By time: measures implemented in the first nine months after the Lehman collapse had the largest negative effects.
- By sector/region: the paper disaggregates impacts by type, advanced/developing countries, regions, sectors, and time (details and estimates are provided at the product level in the full paper).
Quantitative highlights
- 5 to 8 percent: reduction in trade for affected exporter-importer product pairs.
- 0.2 percent: implied decline in aggregate global trade.
- $30-35 billion a year: implied annual aggregate trade decline.
- one third: fraction of measures excluded from aggregate calculations due to incomplete data.
- first nine months after the Lehman collapse: period with the most harmful measures.
Protectionist Responses to the Crisis: Damage Observed in Product-Level Trade, IMF Working Paper No. 2011/139.