Working Paper: CEPR ID: DP17853
Authors: Davide Furceri; Jonathan D. Ostry; Chris Papageorgiou; Pauline Wibaux
Abstract: Are Temporary Trade Barriers (TTBs) introduced for strategic reasons? To answer this question, we construct a novel sectoral measure of retaliation using daily bilateral data on TTB responses in 1220 subsectors across a panel of 25 advanced and emerging-market economies during the period 1989-2019. Stylized facts and econometric analysis suggest that within-year responses are more important in terms of intensity and frequency than commonly understood from the existing literature, which has tended to ignore them. We find that retaliation often consists of responses across many sectors and that same-sector retaliation is far from being the norm. In addition, we find that larger countries tend to retaliate more, and that retaliation is larger during periods of higher unemployment and when the trading partner targeted a domestic comparative advantage sector.
Keywords: Trade retaliation; Protectionism; Antidumping; Temporary trade barriers
JEL Codes: F13; F14; F15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Larger countries (R12) | Retaliate more through TTBs (F38) |
| Heightened unemployment (J64) | Retaliate more through TTBs (F38) |
| Number of TTBs imposed by country i on country j in a specific sector (F14) | Increase in number of newly targeted products by j on i in the same sector (L26) |
| Number of TTBs imposed by country i on country j in a specific sector (F14) | Increase in number of newly targeted products by j on i in other sectors (L19) |
| TTBs (F38) | Retaliation across multiple sectors (L52) |
| Comparative advantage sectors of trading partners (F14) | Intensity of TTBs (H87) |
| TTBs (F38) | Perceived unfair trade practices (L49) |
| TTBs (F38) | Macroeconomic conditions (E66) |