When the economy is down, protection is up.1 But this old story has taken on new urgency. As the crisis is global and synchronised, and as high unemployment continues to generate protectionist pressures, the protectionist reaction has been broader than usual (Evenett 2009). While 1930s style protectionism seems unlikely for the moment, rising protection is, or should be, a global concern. Exports are the key to the macroeconomic recoveries for a wide range of nations.
Tariffs of most major trading economies are up against ceilings (“bindings”) that they committed to in previous WTO negotiations, so they cannot legally raise applied tariffs to respond to demands for additional trade barriers. Instead, many use one of four potentially WTO-consistent “trade remedy” policies – antidumping, global safeguards, countervailing duties, and China-specific safeguards – to respond to industry calls for protection from imports (see Hoekman and Kostecki 2009).
The 4th quarter 2009 data from the World Bank-sponsored Global Antidumping Database, which provides detailed information on use of these four policies, reveal two potentially significant new insights regarding trends in crisis-era protectionism.2
- For the first time since the onset of the crisis in mid-2008, the 4th quarter 2009 totalled a substantial decrease in industry demands for temporary new import barriers through trade remedies.
- The 4th quarter 2009, however, saw a substantial increase in the new trade barriers imposed, as the trade-remedy investigations initiated earlier in the crisis concluded with new protection.
A brief history of trade flows and trade policy during the crisis
The spread of the global financial crisis resulted in a sudden and unexpected drop in global trade flows in the 4th quarter (4Q) 2008. The WTO (2009, p. 3) estimates the year-on-year decline in world trade in 4Q 2008 as over 10%; with large simultaneous drops taking place in Europe (16%), North America (7%) and Asia (5%). In the first quarter of 2009, year-on-year estimates are that world trade declined by another 30%.
The fall in trade during this six month period between 2008 and 2009 was sudden. The contributions in Baldwin (2009) present a list and early empirical examination of the potential culprits behind the trade collapse, including a synchronised negative shock to import demand associated with the international transmission of the recession, increased uncertainty associated with the future state of the global economy, and potentially restricted access to export credit.
The collapse in global trade in 4Q 2008 and 1Q 2009 has not been linked to any major new protectionist initiatives that the G20 members of the WTO had adopted by that point in the crisis. Bown (2009a) provides one set of estimates consistent with this. Even under the unlikely (and subsequently unrealised) scenario that all of these members’ trade remedy investigations initiated from 1Q 2008 through 1Q 2009 were to result in prohibitive trade restrictions for the affected products, as an upper bound this could have impacted less than 0.5% of these economies’ imports. Thus while there is evidence of a global increase in industry requests for new trade remedies beginning in late 2008 and into 2009, the time trends in the data described below indicate that the main increase in imposition of definitive new trade barriers did not fully arrive until late 2009, i.e., after the sharp trade contraction of 4Q 2008 through 1Q 2009 had already taken place.
Thus by early 2009, the main concern for trade policy followers was not necessarily any new “murky protectionism” (Baldwin and Evenett, 2009) that had been imposed to date, instead it was the implications of widespread unemployment and the global economic recession that accompanied the financial crisis. Worsening macroeconomic conditions stoked fears that (i) injured industries and laid-off workers would continue to increase the number of government petitions requesting new trade barriers be imposed under trade remedy laws, and (ii) policymakers would increasingly ignore trade remedy rules requiring a causal linkage between industry injury and imports and impose more and larger barriers to conclude the investigations that had been initiated earlier in the crisis (Bown, 2009b).
What new information is contained in the 4th quarter 2009 data?
The fourth quarter 2009: New initiated trade remedy investigations
First consider industry demands for new import barriers under trade remedies. As illustrated in Figure 1, for the first time since the onset of the global economic crisis in mid-2008, the 4Q 2009 witnessed a significant decline in industry requests for new import restrictions. WTO member governments initiated 26 new product-level investigations under national trade remedy laws in 4Q 2009, a 23.8% decrease compared to the 4th quarter in 2008.3 After four straight quarters of increases, the number of new requests for trade barriers in 4Q 2009 tumbled 57.0% when compared to the previous quarter (3Q 2009).
Figure 1. Newly-Initiated Trade Remedy Investigations, 1Q 2007 - 4Q 2009 (non-redundant AD, SG, CSG, CVD at the product level)
Source: Global Antidumping Database.
As Figure 1 illustrates, developing countries initiated 76.9% of these new investigations compared to 23.1% initiated by developed economies. China continued to be the exporting country most frequently targeted by new investigations, as it was named in 71.4% (15 of the 21) of the investigations under laws that require the investigating country to identify at least one exporting country in 4Q 2009.4
Furthermore, while 4Q 2009 may eventually come to be known as a turning point in the protectionism data, also consider the annualised data. The 2009 total number of industry requests for trade barriers (140 product-level requests) was 19.7% higher than the total (115) requests filed for 2008, which itself was 35.0% higher than the total (81) requests filed in 2007.5
The fourth quarter 2009: Newly imposed import restrictions
The 4Q 2009 also provides the first evidence of the long-anticipated increase in the imposition of the new trade barriers after the conclusion of these trade remedy investigations initiated during the crisis. As Figure 2 indicates, 4Q 2009 resulted in a 35.7% increase in the number of new import-restricting measures imposed, when compared to the same period in 2008. WTO members imposed 30 new product-level definitive import restrictions in 4Q 2009 under national trade remedy laws which is also a significant jump from the 21 newly imposed definitive import restrictions imposed in the last quarter (3Q 2009).
Figure 2. Newly-Imposed Trade Remedies, 1Q 2007 - 4Q 2009 (non-redundant AD, SG, CSG, CVD at the product level)
Source: Global Antidumping Database.
The increase in the quarterly count of newly imposed trade barriers has been predicted given (i) the increase in investigations initiated during the earlier stages of the global economic crisis in 2008-2009 (see again Figure 1) and (ii) historical evidence that the majority of new investigations ultimately result in imposition of new “definitive” import restrictions, typically with a 12- to 18-month lag.
The annual total of newly imposed import restrictions for 2009 is 29.5% higher than the total for 2008. (Though it is worth noting that 2008 does cover the low point in the post-1995 period for new measures imposed, and 1.5% fewer product-level import restrictions were imposed in 2008 when compared to 2007.) An upward trend is likely to continue into 2010 given the substantial backlog of ongoing investigations initiated from 4Q 2008 through 3Q 2009.
As Figure 2 again indicates, developing countries imposed 83% of the definitive new measures, compared to developed economies which imposed 17%. China was the exporting country most frequently targeted by imposition of new import-restricting trade remedies in 4Q 2009, named in 73.9% (17 of the 23) of the investigations in which it was necessary to identify at least one exporting country. (Of the 30 product-level newly imposed trade barriers in 4Q 2009, four did not name any exporting countries because they were global safeguards, and China imposed three measures itself.)
The fourth quarter 2009: Investigations completed without new trade remedies
A final issue to examine is the frequency with which completed investigations result in the imposition of new trade barriers. While Figure 2 indicates that the number of new import restrictions imposed under trade remedy laws grew substantially in 4Q 2009, it turns out that 73.1% of the investigations completed in 4Q 2009 resulted in the government imposing a new trade remedy.
Figure 3 plots, for each quarter, the share of all completed investigations that result in the imposition of final trade barriers decomposed into two groups of investigating countries – developed economies and developing economies.6 While there had been a sharp decline in the share of completed investigations that resulted in new trade restrictions for both developing and developed economies in 2Q 2009 through 3Q 2009, this share increased for both groups in 4Q 2009. In developed economies, 58.3% of completed investigations resulted in new barriers in 4Q 2009, whereas 75.8% of completed investigations in developing countries ended in a new trade remedy.
Figure 3. Share of Completed Investigations Resulting in Definitive Import Barriers, by Investigating Country Category, 1Q 2007 - 4Q 2009
Source: Global Antidumping Database.
Notes: Unlike Fig. 1 and Fig. 2, defined at the exporter-product level since multi-country investigations can result in measures against some exporters but not others.
1 See Feinberg (1989) and Irwin (2005) for studies of the US experience, Knetter and Prusa (2003) examine the US and other developed economies, and Bown (2008) focuses on developing countries.
2 This analysis draws from Bown (2010b), which provides a more detailed description of the data summarised here. The current analysis covers more than 25 economies which collectively account for more than 90% of the historical use of these policies. More generally, the Global Antidumping Database (Bown, 2010a) reports detailed information on the four trade remedy policies of antidumping (AD), countervailing duties (CVD), global safeguards (SG) and China-specific safeguards (CSG), comprehensively collected across the major WTO member economies. In addition to the raw data, it also provides quarterly monitoring reports examining earlier trends on remedy use through 2008, 1Q 2009, 2Q 2009, and 3Q 2009.
3 Bown (2010b, appendix table 1) lists 41 different trade remedy investigations during 4Q 2009 that can be reduced to the 26 (non-redundant) product-level investigations illustrated in the figure. To make comparable the data on policy use across the four different trade remedy laws, AD or CVD investigations against multiple exporting countries are treated as one product-level investigation, and simultaneous (AD and CVD) investigations over the same product are not double counted.
4 Global safeguards are applied on an MFN basis and so do not require the investigating country to name exporting country targets. Of the 26 product-level newly initiated investigations in 4Q 2009, three did not name any exporting countries because they were global safeguards, and China initiated two investigations itself.
5 The year 2007 was the low point in the global use of trade remedies during the period since 1995. Indeed, the low point for newly imposed definitive trade remedies occurred in 2Q 2008 (Fig. 2), i.e., four quarters after the low point for newly initiated trade remedy investigations in 2Q 2007 (Fig. 1).
6 A “completed investigation” is defined as any initiated investigation that terminates in a given quarter due to any of the following: 1) definitive measures were imposed; 2) the final decisions in the investigation were made and the government decided that no measures would be imposed; 3) the preliminary decisions in the investigation were made and the government decided that no measures would be imposed; or 4) the domestic industry withdrew the petition requesting new import restrictions.
Baldwin, Richard E., Ed. (2009) The Great Trade Collapse: Causes, Consequences and Prospects. A VoxEU.org Ebook, November
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Bown, Chad P (2010a), “Global Antidumping Database”, Version 6.0, February, forthcoming.
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Bown, Chad P (2009a), “The Global Resort to Antidumping, Safeguards, and other Trade Remedies Amidst the Economic Crisis,” chapter 7 in Simon Evenett, Bernard Hoekman, and Olivier Cattaneo, Eds., Effective Crisis Response and Openness: Implications for the Trading System. London, UK: World Bank and CEPR, December.
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Knetter, Michael M and Thomas J Prusa (2003), “Macroeconomic Factors and Antidumping Filings: Evidence from Four Countries”, Journal of International Economics, 61(1): 1-17.
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