Temporary Trade Protection and the Local Labor Market Effects of Trade

Abstract

Trade liberalization and the recent emergence of China into world markets has led to a surge in U.S. temporary trade protections (defined as anti-dumping duties, countervailing duties, and safeguards) in an effort to address the distributional consequences of increased Chinese imports on local markets. I study the efficacy of temporary trade protection in reducing targeted import streams, and alleviating the local distributional consequences of U.S. trade liberalization with China.

Prior literature associates Chinese import competition with relative employment and wage losses in local U.S. markets. To contextualize these findings with U.S. temporary protection policy, I employ an event-study model to examine policies’ impacts in reducing trade flows, accounting for the non-random nature of their assignment. I then use an instrumental variables model– inspired by Autor, Dorn, and Hanson (2013a)– with the Acemoglu et al. (2016) model of import penetration, to study the distributional consequences of trade in domestic local labor markets. I further build upon these models by incorporating two novel metrics for temporary protection coverage, and by expanding the survey period to span from 1990 to 2015.

I find evidence that (1) temporary trade protection was successful in reducing the growth of targeted import flows from U.S. trade partners, including China. I also show that (2) these protections had an ambiguous, largely insignificant effect in insulating local labor markets from the relative distributional consequences of the China shock. Additionally, the results affirm some prior conclusions: that (3) import competition is associated with local manufacturing employment share losses, and that (4) unemployment rose in more trade-exposed domestic labor markets. Finally, contrary to prior findings, I show that (5) non-college educated workers in local manufacturing sectors experienced significant wage-losses associated with Chinese import competition.