Johannes Fritz

While considerable attention has been directed towards Chinese management of its currency vis-à-vis the U.S. dollar, the frequent alteration during the recent global economic downturn of rebates on value-added taxes paid by exporters on the inputs they have imported has been overlooked. In this paper the relevant Chinese policy changes are documented and evidence to help gauge the relative importance of this form of intervention presented. Given the relatively high share of imported value-added in Chinese exports, even apparently small changes in VAT export rebates are equivalent to non-trivial percentages of domestic value-added. This finding adds further nuance to our understanding of the impact of supply chains on the resort to protectionism during the crisis.

Having grown in real terms by 60% between 2000 to 2008, extra-EU exports have since stagnated. Stripping out other determinants of EU export growth, the focus here is on the impact of trade distortions imposed by foreign governments since the global economic crisis began. Our econometric analysis implies that crisis-era trade distortions held back EU Member State export growth to destinations outside of the EU by between 10-20 percentage points between 2008 and 2014. We estimate that the EU export growth deficit compared to China (amounting to on average 35 percentage points from 2008 to 2014) would have been halved in the absence of foreign trade distortions.

Not since the London Summit of in April 2009 has protectionism had such a high profile in the run-up to a G20 Leader’s Summit. President Trump’s America First policies have drawn sharp criticism from leaders of other G20 governments. Accusations and counter-accusations of unfair trading practices have become a regular occurrence. So as to shed light on competing claims, this Global Trade Alert report documents the actions taken by G20 governments through to the end of June 2017.