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Import liberalization as export destruction? Evidence from the United States

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  • Breinlich, Holger
  • Leromain, Elsa
  • Novy, Dennis
  • Sampson, Thomas

Abstract

How does import protection affect export performance? In trade models with scale economies, import liberalization can reduce an industry's exports by cutting domestic production. We find this export destruction mechanism reduced US export growth following the normalization of trade relations with China (PNTR). But there was also an offsetting boost to exports from lower input costs. We use our empirical results to calibrate the strength of scale economies in a quantitative trade model. Counterfactual analysis implies that while PNTR increased aggregate US exports relative to GDP, exports declined in the most exposed industries because of the export destruction effect. On aggregate, the US and China both gain from PNTR, but the gains are larger for China.

Suggested Citation

  • Breinlich, Holger & Leromain, Elsa & Novy, Dennis & Sampson, Thomas, 2021. "Import liberalization as export destruction? Evidence from the United States," LSE Research Online Documents on Economics 113926, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:113926
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    File URL: http://eprints.lse.ac.uk/113926/
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    Cited by:

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    2. Robin Sogalla, 2023. "Unilateral Carbon Pricing and Heterogeneous Firms," Discussion Papers of DIW Berlin 2060, DIW Berlin, German Institute for Economic Research.

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    More about this item

    Keywords

    trade policy; import liberalization; comparative advantage; scale economies; China shock;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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