Election outcomes spanning from the mid-2010s to the early 2020s within the European Union and
the US, shared a common thread: a rising support for populist parties. In recent years, two major
and conflicting narratives have come to light in explaining the growing appeal of populist parties:
while (Inglehart and Norris, 2016) found mainly cultural reasons for the rise of populist parties,
others including (Colantone and Stanig, 2018; Guiso et al., 2019) argued for a larger role of
economic factors.
This paper investigates the trade shock of China joining the WTO in 2001 and its impact on the
Central and Eastern European (CEE) region. The trade shock in the USA and in Western Europe,
led to the manufacturing sector experiencing import competition from cheaper Chinese goods,
which resulted in loss of business, closures and layoff of workers. This increased resentment
amongst voters, and increased support for populist politicians. However, the CEE region was a
beneficiary of globalisation as many of the enterprises from Western Europe relocated to this
region because of lower wages, therefore the article test whether an increase in Chinese imports led to an increase of populist support amongst voters or was increased foreign direct investment able to counterbalance it?
This article uses a Bartik type instrument (Autor et al., 2013) and NUTS-2 regional data, to test how
voters in CEE countries responded to trade shocks. We use a 2SLS regression and instrument the CEE trade shock with an IV, and prove a significant and causal relationship between the increase of imports from China and the rise of the populist vote in the CEE region and show that despite record foreign direct investment into the region, exposure to trade with China increased the populist vote.