Trade Effects of Industrial Policies: Are Preferential Agreements a Shield ?

Alessandro Barattieri, Aaditya Mattoo and Daria Taglioni

No 10806, Policy Research Working Paper Series from The World Bank

Abstract: This paper explores the effects of industrial policy on trade, focusing on the role of preferential trade agreements. The analysis uses data for the period 2012–2022 on detailed product-level bilateral trade, industrial policy announcements, and rules on subsidies in different preferential trade agreements. The introduction of a new industrial policy measure in a destination market reduces export growth to that market on average by about 0.28 percent. However, exports from fellow members of preferential trade agreements are not adversely affected and may even be positively affected if the agreements have deep disciplines on subsidies. These findings suggest that preferential trade agreements have a shielding effect against the trade distorting effects of industrial policies.

Date: 2024-06-17
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