Retaliatory Use of Public Standards in Trade

Abstract

This research investigates the extent to which countries use public standards as a means of political retaliation in the international policy arena. We construct a dataset that matches the adoption of public standards between 1996-2015 with annual, bilateral trade flows and the initiation of antidumping and countervailing duty (ADCV) proceedings. Our results indicate that-over the period of analysis-public standards were frequently used for retaliatory purposes. The imposition of a public standard or the instigation of an ADCV proceeding by one country against another country increased the probability that the target country would adopt a standard of its own. Retaliation commonly occurred outside the product group of the original measure. At the 2-digit product level, we find that about 4,000 bilateral trade flows were subject to retaliatory standards. Under reasonable assumptions, this equates to trade losses in the range of $30-$40 billion per year. However, implications may not be exclusively trade destructive. Retaliation may also have induced the withdrawal of non-tariff barriers in partner countries.