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As the economic crisis deepens and widens, fears of a return to the protectionist spiral of the 1930s become more common. However, an important difference between the 1930s and today is the existence of the World Trade Organization and the legal limits it imposes on the protectionist responses members can pursue. The objective of this paper is threefold. First, to assess the extent to which applied tariff can legally be raised without violating tariff-bound obligations, and compare it with what is economically possible. Second, to examine what has been the protectionist response of individual countries when facing an economic crisis since the creation of the WTO. Finally, to predict how far the protectionist responses will go during the current crisis. Results suggest that the policy space left when looking at what is economically possible is indeed quite large. However, in the recent past very little of the available policy space has been used by countries suffering from an economic crisis. Our predictions for the current crisis are modest tariff hikes in the order of 8 percent.

Debt Markets --- Finance and Financial Sector Development --- Free Trade --- Global trade --- Import duties --- Import value --- Imports --- International Economics & Trade --- International trade --- International Trade and Trade Rules --- Member countries --- Non-tariff barriers --- Preferential agreements --- Preferential trade agreements --- Protectionism --- Protectionist --- Public Sector Development --- Regional trade --- Tariff act --- Tariff bindings --- Tariff changes --- Tariff increases --- Tariff lines --- Tariff policy --- Trade barriers --- Trade Policy --- Water Conservation --- Water Resources --- World trade

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Emerging literature has demonstrated some unique characteristics of trade in differentiated products. This paper contributes to the literature by postulating that differentiated products may be subject to greater tariff evasion due to the difficulties associated with assessing their quality and price. Using product-level data on trade between Germany and 10 Eastern European countries during 1992-2003, the authors find empirical support for this hypothesis. They show that the trade gap, defined as the discrepancy between the value of exports reported by Germany and the value of imports from Germany reported by the importing country, is positively related to the level of tariff in 8 out of 10 countries. Further, the authors show that the responsiveness of the trade gap to the tariff level is greater for differentiated products than for homogeneous goods. A one-percentage-point increase in the tariff rate is associated with a 0.6 percent increase in the trade gap in the case of homogeneous products and a 2.1 percent increase in the case of differentiated products. Finally, the data indicate that greater tariff evasion observed for differentiated products tends to take place through misrepresentation of the import prices.

Access to Markets --- Agribusiness and Markets --- Commodities --- Customs --- Customs Clearance --- Customs Clearance Procedures --- Customs Declarations --- Customs Duties --- Customs Value --- Debt Markets --- Export Competitiveness --- Exports --- Finance and Financial Sector Development --- Free Trade --- Import Data --- Import Duties --- Import Prices --- Imports --- Industry --- International Economics & Trade --- International Trade and Trade Rules --- Macroeconomics and Economic Growth --- Markets and Market Access --- Public Sector Development --- Rural Development --- Tariff --- Tariff Rate --- Tariff Rates --- Tariffs --- Tax Revenue --- Trade --- Trade Data --- Trade Liberalization --- Trade Policy --- Water and Industry --- Water Resources --- World Trade