Are Temporary Trade Barriers (TTBs) introduced for strategic reasons? To answer this question, we construct a novel sectoral measure of retaliation using daily bilateral data on TTB responses in 1220 subsectors across a panel of 25 advanced and emerging market economies over 1989-2019. Stylized facts and econometric analysis suggest that within-year responses are more important in terms of intensity and frequency than commonly understood from the existing literature, which has tended to ignore them. We find that retaliation often consists of responses across many sectors and that same-sector retaliation is far from being the norm. In addition, we find that larger countries tend to retaliate more, and that retaliation is larger during periods of higher unemployment and when the trading partner targeted a domestic comparative advantage sector.
This paper uses granular customs data from France to investigate propagation of the COVID-19 shock along the supply chains in 2020. It quantifies the effect of the COVID-19 shock on trade adjustment and identifies mitigating and amplifying factors contributing to French firms’ heterogeneous adjustment paths. Early in the pandemic, firms mainly responded to global lockdowns and spread of the virus by reducing trade volumes (intensive margin) as opposed to exiting from import and export markets (ex-tensive margin). However, adjustment along the extensive margin played a more important role in trade with developing countries. It is shown that the impact of lockdowns was stronger for final consumer goods and the trade recovery was predominantly demand-driven. More automated, inventory-intensive, older, and medium-sized firms were more insulated from the shock, whereas firms’ reliance on air transportation for shipping goods amplified the shock. Trade bans and promotion measures implemented by governments in response to the pandemic had little impact on aggregate trade flows.
This paper uses granular customs data from France to investigate propagation of the COVID-19 shock along the supply chains in 2020. It quantifies the effect of the COVID-19 shock on trade adjustment and identifies mitigating and amplifying factors contributing to French firms’ heterogeneous adjustment paths. Early in the pandemic, firms mainly responded to global lockdowns and spread of the virus by reducing trade volumes (intensive margin) as opposed to exiting from import and export markets (ex-tensive margin). However, adjustment along the extensive margin played a more important role in trade with developing countries. It is shown that the impact of lockdowns was stronger for final consumer goods and the trade recovery was predominantly demand-driven. More automated, inventory-intensive, older, and medium-sized firms were more insulated from the shock, whereas firms’ reliance on air transportation for shipping goods amplified the shock. Trade bans and promotion measures implemented by governments in response to the pandemic had little impact on aggregate trade flows.
Are Temporary Trade Barriers (TTBs) introduced for strategic reasons? To answer this question, we construct a novel sectoral measure of retaliation using daily bilateral data on TTB responses in 1220 subsectors across a panel of 25 advanced and emerging market economies over 1989-2019. Stylized facts and econometric analysis suggest that within-year responses are more important in terms of intensity and frequency than commonly understood from the existing literature, which has tended to ignore them. We find that retaliation often consists of responses across many sectors and that same-sector retaliation is far from being the norm. In addition, we find that larger countries tend to retaliate more, and that retaliation is larger during periods of higher unemployment and when the trading partner targeted a domestic comparative advantage sector.
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