| Abstract: | A New Look at the Impact of U.S. Import Barriers on Corporate Profit Expectations. — The notion that industries benefit from
protection is firmly grounded in trade theory. However, previous “event studies” measuring the impact of trade restrictions
on stock prices reveal that shareholders expect no improvement in industry profits from protection. The implication is that
barriers designed to promote industry adjustment are considered ineffective by equity holders. This investigation of U.S.
“Escape Clause” cases shows that shareholders do expect protection to enhance profits, but not universally. Outcomes are linked
to the type of trade measure selected, with industries protected by tariffs or global quotas faring better than those shielded
by nonglobal “Orderly Marketing Agreements.” |
