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World Trade Organization sanctions, implementation, and retaliation

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  • Benjamin Liebman
  • Kasaundra Tomlin

Abstract

This is the first empirical paper to investigate the response of shareholders to the application of WTO-authorized trade retaliation. We compare shareholder gains stemming from illegal trade subsidies with the losses generated by subsequent WTO-authorized retaliatory measures. Results indicate that the average increase in share returns of U.S. firms receiving subsidies provided by the “Byrd Amendment” exceeded the share declines experienced by firms targeted with associated retaliatory tariffs. Our results also suggest that retaliatory threats have a smaller impact on targeted firms when there is less certainty that protection will actually be implemented. In general, we believe that the relatively subdued response toward retaliation diminished pressure on U.S. policymakers to strike down the Byrd Amendment, as was mandated by the WTO. Apathy toward retaliation along with associated delays in WTO compliance by the U.S. may reflect a potential weakness on the part of WTO-authorized retaliation in serving as an effective political counterweight to pro-antidumping forces in the U.S. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Benjamin Liebman & Kasaundra Tomlin, 2015. "World Trade Organization sanctions, implementation, and retaliation," Empirical Economics, Springer, vol. 48(2), pages 715-745, March.
  • Handle: RePEc:spr:empeco:v:48:y:2015:i:2:p:715-745
    DOI: 10.1007/s00181-013-0794-2
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    References listed on IDEAS

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