Import competition and industrial competitiveness: Evidence for the EU and Austria

International trade is generally seen by economists as a vehicle to accelerate productivity growth and employment in all trading countries, and to benefit consumers in each country via greater product variety. However, under certain conditions the benefits of trade may not be equally shared. In recent years criticism has mounted in the USA that import competition from China would hurt US manufacturing employment and holds back US innovation in manufacturing industries. David Autor and co-authors provided evidence for such negative effects of foreign competition on regional employment in the USA. Evidence from the USA, however, can hardly be transferred to Europe due to differences in industrial structures and technological capabilities. It remains unclear if and how the competitiveness of Austrian manufacturing firms, employment and wage dynamics were affected by import competition in the past decade. We study the resilience of firms and regions (or possibly the lack thereof) to import competition from BRICS and especially China in Europe, and also pay special attention to the Austrian situation. The analyses cover the regional level (NUTS 2 in Europe and NUTS 4 in Austria), the industry and the firm level. The analysis at the EU level allows putting the results for Austria into a broader perspective. The research team is able to draw on a wealth of data that allows exploring the impact of foreign competition on Europe and Austria in a variety of ways. The data sets proposed include unique micro-data on strategies of Austrian manufacturing firms and unique data sets that allow the analysis of EU regions at a fine level of sectoral disaggregation.