associated with 25 (70) percent more US import protection and 43 (95) percent more EU import protection.

Returning to Table 3, the remaining columns apply the modeling approach and robustness checks to the subsample of the relatively smaller economies of Australia, Canada, and South Korea. On average for these three countries, the estimated IRRs are in line with the theory; however, the IRRs are not consistently statistically significant across different specifications. Thus the estimated trade policy response through these TTBs to macroeconomic shocks appears to be somewhat weaker for smaller industrialized countries than for the United States and European Union.<sup>24</sup> One likely contributing explanation is that these economies are less frequent users of TTBs, on average, than the US and EU (see again Table 1).<sup>25</sup>

# **4 Import Protection during the Great Recession**

# **4.1 Protectionist expectations**

During the early period of the Great Recession, a widespread fear of “protectionism” among policymakers led to the coordinated, G20 declaration of November 2008 cited above. Furthermore, policymakers asked major multilateral institutions to establish new trade policy surveillance initiatives in order to monitor and report on national changes in policies that could impact international trade.<sup>26</sup> 24 An interesting empirical question is whether the South Korean experience during the Asian Financial crisis of 1997-1998 foreshadowed what would happen in the US and EU during the Great Recession. Like the US and EU during 2008-2010 that we detail below, South Korea did not turn to heavy TTB use during 1997-1998. However, in other regards the two crises appear more different than similar. While South Korea did experience a sharp increase in its unemployment rate, the behavior of its real exchange rate and of the GDP growth of foreign trading partners was markedly different from the analogous variables facing the US and EU during the Great Recession. In contrast to the real US dollar, which appreciated sharply at the start of the more recent global financial crisis, the real Korean won depreciated sharply in 1997. Further, the Asian Financial Crisis did not lead to a slowdown in GDP growth around the world. Thus, the applicability of the South Korean experience to later financial crises in industrialized economies is limited.

25 In unreported results, we have also investigated whether including the WTO disciplines variable – introduced in section 3.1 and included in Table 2, specification (7) – improves upon the estimates for this subsample of countries. It does not, which suggests that the main impact captured by the WTO disciplines variable in Table 2, specification (7) is due to variation across the five policy-imposing economies - e.g., the US and EU have relatively more products bound by WTO disciplines than do Australia, Canada and South Korea – and not from inter-temporal variation within one of these policy-imposing economies.

26 Bown (2011c) provides a discussion of the World Bank’s initiatives, as well as efforts by the World Trade Organization Secretariat and the establishment of the high-profile Global Trade Alert.

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