The Heterogeneous Impacts Of Protectionist Policies On Post Restriction Trade Patterns: How US Priority-Rated Contracts During COVID Affected EU Supply Chains Of Medical Products
38 Pages Posted: 3 Feb 2025
There are 2 versions of this paper
The Heterogeneous Impacts Of Protectionist Policies On Post Restriction Trade Patterns: How US Priority-Rated Contracts During COVID Affected EU Supply Chains Of Medical Products
The Heterogeneous Impacts of Protectionist Policies on Post-Restriction Trade Patterns: How Us Priority-Rated Contracts During Covid Affected EU Supply Chains of Medical Products
Date Written: September 30, 2024
Abstract
Temporary protectionist policies are common government tools for responding to major shocks or crises. While potentially effective in the short-term, they may have underappreciated longer-term consequences that extend beyond the policy horizon of crisis-consumed policymakers. Our research explores whether there were lasting impacts on EU medical products' supply chains from one particular US protectionist policy: priority-rated contracts during the COVID pandemic. We show these heterogeneous impacts on EU supply chains by monitoring the share of imports by suppliers' country-of-origin using European official trade data. We employ a Difference-inDifferences approach to estimate the impact of such contracts on EU trade patterns. We find that once terminated, the US share of total EU imports decreases, on average, by 17.8% for affected products, shifting largely to China. In commodity-like products, where price competition dominates buyer decision-making, these effects seem to be negative and lasting. However, that same trend was not observed for Mechanical ventilators: once the policy is lifted, the EU increases its reliance on the US, on average, by 19%. For these technologically complex differentiated products competition revolves not only around cost, but also quality and performance. Due to the unique conditions of the COVID-19 pandemic, we are able to observe such distinct market dynamics, but these heterogeneous buyers' reactions to trade shocks might also be pertinent in other contexts, particularly for export-dependent economies.
Suggested Citation: Suggested Citation