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Import Liberalization as Export Destruction? Evidence from the United States

Author

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  • Breinlich, Holger

    (Centre for Economic Performance & University of Surrey)

  • Leromain, Elsa

    (Centre for Economic Performance, IRES/LIDAM & UC Louvain)

  • Novy, Dennis

    (Centre for Economic Performance & University of Warwick)

  • Sampson, Thomas

    (Centre for Economic Performance & London School of Economics)

Abstract

How does import protection affect export performance? In trade models with scale economies, import liberalization can reduce industry-level exports by cutting domestic production. We show that this export destruction mechanism reduced US export growth following the permanent 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, 2022. "Import Liberalization as Export Destruction? Evidence from the United States," The Warwick Economics Research Paper Series (TWERPS) 1413, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:1413
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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 JEL Classification: F12 ; F13 ; F15;
    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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