American Protectionism And Construction Materials Costs



Alessandro Barattieri and Matteo Cacciatore | Cato Institute

Building on previous work, we used data on U.S. trade remedies—antidumping, countervailing duty (anti‐​subsidy), and safeguard measures—to study the effect of protectionism on construction material prices in the United States. Several factors make trade remedies an ideal mechanism for examining this question: First, the United States (like many countries) uses trade remedies extensively to restrict trade in intermediate inputs (i.e., goods used in the domestic production of downstream goods and services). Second, domestic producers of important construction materials (e.g., lumber) have petitioned for and won trade remedy protection in the past three decades. Third, trade remedy data make it possible to measure import protection at a monthly frequency, making the identification of causal effects less difficult.

This analysis considers the most important trade remedy beneficiary industries (at the North American Industry Classification System [NAICS] four‐​digit industry level) among the construction sector’s material suppliers. For each industry, we determined the share of imports subject to new trade remedies measures and then identified changes to the share that are not attributable to industry‐​level economic outcomes related to the construction sector (e.g., previous employment and price dynamics). Finally, we combined these identified changes in trade remedies with disaggregated input‐​output tables to determine the exposure of the U.S. construction sector to trade remedies restrictions won by its domestic suppliers (a.k.a. “upstream protectionism”). We used this measure to estimate the dynamic effects of upstream protectionism on U.S. construction material costs—in other words, to determine how trade remedies affect U.S. prices of key construction inputs like lumber.

We found that upstream protectionism in the United States increases domestic construction material costs. In particular, a uniform 1 percentage point increase in the share of construction material imports into the United States that are subject to new trade remedies (approximately corresponding to a 1.35 percentage point uniform import tariff) increases the domestic price of those materials by 0.9 percent after six months. These results are statistically significant and confirmed by using an alternative measure of construction material costs specific to residential construction. Therefore, U.S. protectionism has increased domestic construction costs, with potentially significant consequences for American homebuyers.

American Protectionism and Construction Materials

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