Import Dynamics and Demands for Protection

Abstract

What kinds of changes in foreign competition lead domestic industries to seek import protection? To address this question, we use detailed monthly US import data to investigate changes in import composition during a 24-month window immediately preceding the filing of a petition for import protection. A decomposition methodology allows a comparison of imports from two groups of countries supplying the same product: those that are named in the petition and those that are not. The same decomposition can be applied to products quite similar to the imports in question, but not subject to a petition. The results suggest that industries typically seek protection when faced with a specific pattern of shocks. First, a persistent positive relative supply shock favours imports from named countries. Second, a negative demand shock hits imports from all sources just prior to domestic industries’ petition for protection. The relative supply shock is a broad one; it applies both to named commodities and to the comparison product group. The import demand shock, by contrast, is narrow, hitting only named products. This negative import demand shock appears to be a key event in the run-up to the filing of a petition. This latter shock has been missed by previous studies using more aggregated data. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions. http://olabout.wiley.com/WileyCDA/Section/id-820227.html