Evaluating the symmetry of trade policy: Evidence from liberalization reversals

Abstract

Is trade policy symmetric? Using a dataset of trade agreements from 1986 to 2016, we identify 596 instances of trade liberalization reversals where standing agreements are revoked and barriers to trade are reinstated. We study the impact of these reversals on import volumes to understand whether the size of trade flows responses to liberalization and protectionist policies are symmetric. The baseline results do not reject the null hypothesis of perfect policy symmetry: after a liberalization policy is reversed trade flows are on average indistinguishable from flows that did not experience earlier liberalization. Heterogeneity analysis reveals, however, that attributes of reversed policies, such as length and depth, impact their symmetry properties. In a context of increased policy volatility and evolving trade policymaking framework, this study pioneers research about the relative impacts and the persistence of liberalization and protectionism. The findings equip policymakers with critical insights into the durable benefits of liberalization, amidst protectionist pressures, and open new avenues for future research to explore the intricate dynamics of trade policy symmetry.