Retaliatory Use of Public Standards in Trade

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.