Differentiated protectionism in the European Union : The role of superstar exporters and fiscal capacity

Abstract

What factors drive trade-harmful protectionist policy interventions enacted by European Union (EU) member states? Although EU trade policy is placed under supranational competence, we highlight that trade policy decisions differ within and across the EU national governments. We explain this variation by building on the New New Trade Theory and argue that sectors dominated by highly productive ‘superstar exporters’ are less likely to receive protectionist support, yet governments with greater fiscal capacity are more likely to support these same sectors through non-tariff instruments such as subsidies – and, occasionally, even tariffs. Using data from the Global Trade Alert (2012–2022) and relying on Poisson regression analyses, we find support of our argument. These findings contribute to the literature on EU trade policy, New New Trade Theory and the domestic foundations of trade policy under supranational governance by highlighting the interaction between sectoral competitiveness and fiscal capacity.