Is Protectionism on the Rise? Assessing National Trade Policies during the Crisis of 2008

Abstract

To understand the role of trade policies in the crisis of 2008, this paper constructs the overall trade restrictiveness indices for a wide range of countries using their tariff schedules in 2008 and 2009. The index summarizes the trade policy stance of a country, taking into account the share of each good in trade as well as its corresponding import demand elasticity. Results show that there is no widespread increase in protectionism via tariff policies since the global financial crisis has unfolded. While many countries have adjusted tariffs upward on selected products, only a handful of countries, such as Malawi, Russia, Argentina, Turkey and China focus on products that have significant impacts on trade flows. The United States and the European Union, by contrast, rely mainly on anti-dumping duties to shield domestic industries. Overall, while the rise in tariffs and anti-dumping duties in these countries may have jointly caused global trade to drop by as much as US$43 billion during the crisis period, it explains less than 2 percent of the collapse in world trade.