Emerging Economies, Trade Policy and Macroeconomic Shocks (REVISED January 2013)
This paper estimates the impact of aggregate fluctuations on the time-varying trade policies of thirteen major emerging economies over 1989-2010; by 2010, these World Trade Organization (WTO) member countries collectively accounted for 21 percent of world merchandise imports and 22 percent of world gross domestic product. We examine determinants of carefully constructed, bilateral measures of new import restrictions on products arising through the temporary trade barrier (TTB) policies of antidumping, safeguards and countervailing duties. Our approach explicitly addresses changes to the institutional environment facing these emerging economies as they joined the WTO and adopted disciplines to restrain their application of other trade policies such as applied import tariffs. We find evidence of a counter-cyclical relationship between macroeconomic shocks and new TTB import restrictions in addition to an important role for fluctuations in bilateral real exchange rates. Furthermore, for the subset of major G20 emerging economies, the trade policy responsiveness coinciding with WTO establishment in 1995 suggests a significant change relative to the pre-WTO period; i.e., new import restrictions became more countercyclical over time. Finally, we document evidence on changes to some of these empirical relationships coinciding with the Great Recession.