The Great Recession and Import Protection: The Role of Temporary Trade Barriers

18/06/2015 10:28 - 556 Views

Chad P. Bown - Senior Economist at the World Bank in the Development Research Group, Trade & International

Integration Team (DECTI).

Abstract:

The Great Recession of 2008-9 imposed a negative shock on the global economy comparable to the 1930s Great Depression. Nevertheless, one fundamental distinction between the Great Depression and the Great Recession is that the 2008-9 global economic contraction did not result in a massive wave of new protectionism. Comprehending why the 2008-9 economic crisis failed to trigger a downward spiral of beggar-thy-neighbour policies is fundamental to understanding the resilience of the global economy and the 21st century multilateral trading system. While there was not a large scale resort to protectionism, the facts simply do not support the idea that countries did not adjust their trade policies during this period. Policies like antidumping, safeguards, and countervailing duties – what this volume refers to collectively as temporary trade barriers (TTBs) – played an important and perhaps even critical role during the 2008-9 crisis.

This Introduction provides a summary and timeline of events in the Great Recession, including its macroeconomic and trade impacts, the uncertainty over trade policy in 2008-9, and the response to calls for additional monitoring of trade policy. In particular, this Introductions highlights the real time monitoring efforts of the World Bank’s Global Antidumping Database and subsequent Temporary Trade Barriers Database. These efforts both addressed some of the immediate concern about the unknown scale of protectionism taking place in 2008-9 and revealed a lack of informational preparedness that has ultimately spurred this volume’s research.

The Introduction then summarizes new research on how the eleven economies of focus in this volume - four high-income and seven emerging – collectively increased by 25% the imported products that they subject to TTB import protection during the crisis. Nevertheless, there is substantial heterogeneity to this result across countries – e.g., developing countries used TTBs to cover 39% more imported products by the end of 2009 compared to 2007, whereas recession-ravaged high-income economies surprisingly increased their coverage by only 4%. Finally, the Introduction summarizes how the volume's authors apply a new methodological approach, as well as detailed, product-level data on TTBs, trade flows, and other trade policies to better interpret these crisis-era changes in historical context.