Determinants of trade-policy responses to the 2008 financial crisis
Kishore Gawande, Bernard Hoekman, Yue Cui 10 November 2011
The Great Trade Collapse of 2008–09 did not give rise to rampant protectionism. This column examines the determinants of the observed pattern of trade-policy responses to the 2008 crisis, using data for seven large emerging markets that have a history of active use of trade policy. Vertical specialisation is found to be the most powerful economic factor determining trade-policy responses.
The “Great Trade Collapse” that occurred between the second quarter of 2008 and the third quarter of 2009 was the steepest fall of world trade in recorded world history. Despite the trade collapse, the 2008 crisis and its recessionary aftermath did not fuel widespread protectionism.
tariffs, protectionism, vertical specialisation