The Impact of Foreign Trade Protection Measures on Chinese Manufacturing Export: Micro-evidence at Firm Level

Abstract

Influenced by the international financial crisis, the trend of trade protectionism has risen, and as the world’s largest manufacturing exporter, China is the first to bear the brunt of trade protectionism. As a report of GTA in 2012 pointed out that China is the country with the largest number of trade protection measures and the variety of trade protection measures that affect China’s foreign trade has also been constantly refurbished. Increasingly frequent and multitudinous foreign trade protection measures pose a serious threat to the growth of China’s manufacturing export. So, what is the actual impact of foreign trade protection measures on China’s manufacturing export? How is the influence mechanism? Are there any differences in the impact of different types of foreign trade protection measures? Research on these issues will help us to deepen our understanding of the harm of trade protectionism and also provide enlightenment for China’s search for ways to circumvent trade protection barriers. Based on the combined data of GTA database and China Customs Statistics Database from 2009 to 2011, this paper quantitatively evaluates the true impact of foreign trade protection measures on China’s manufacturing export. Then, it divides the scale of trade into quantity margin, quality margin and price margin, and explores the impact mechanism of foreign trade protection measures on China’s manufacturing export. Next, it uses bilateral t-test and cluster analysis to scientifically identify which types of foreign trade protection measures have the greatest impact on Chinese manufacturing export. Finally, it examines the differentiated impact of foreign trade protection measures on China’s manufacturing export from the perspectives of enterprise ownership, product heterogeneity and product use. The main conclusions are as follows: firstly, the implementation of foreign trade protection measures significantly reduces the export scale of affected manufacturing firms. Each additional increase in the number of trade protection measures leads to a reduction in the export of affected firms by about 17%, and an increase in the intensity of trade protection measures by 1% results in a reduction in the export of affected firms by about 52%. Secondly, the inhibitory effect of foreign trade protection measures on manufacturing export is realized by reducing the quantity and quality of export. Thirdly, trade financing has the most significant marginal impact on manufacturing export, while trade remedies are the most protective trade protection measure for manufacturing export. Lastly, trade protectionism is more obvious for foreign-funded enterprises, single-product enterprises, homogeneous products and intermediate goods exports. In short, this paper expands the existing research in three aspects: firstly, it uses firm level data to quantitatively identify the impact of trade protection measures on China’s manufacturing export, and the conclusion is more reliable; secondly, the use of trade protection intensity to characterize the extent to which enterprises are affected by trade protection measures effectively overcomes the problem that the negative impact of trade protection measures on export is underestimated. Thirdly, it employs the method of bilateral t-test and cluster analysis to identify which foreign trade protection measures have the greatest impact on Chinese manufacturing export, and further examines the differentiated effect of foreign trade protection walls on China’s manufacturing export and its impact mechanism.