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Industrial Policy and Retaliatory Protection under the WTO: Lessons from China

Author

Listed:
  • Yusheng Feng
  • Haishi Li
  • Siwei Wang
  • Min Zhu

Abstract

Using Chinese firm-level trade data combined with global anti-dumping (AD) and countervailing duty (CVD) investigations, we uncover a previously overlooked cost of industrial policy under WTO agreements. At every stage of AD/CVD investigation, subsidies significantly raise the probability of affirmative tariff rulings and lead to higher imposed tariffs. Firms that received larger subsidies are also less likely to be granted firm-specific duties, which are lower than the product-level duties applied to all other firms exporting the investigated product. While AD/CVD duties create a moderate trade barrier that an average Chinese firm expects to face, they represent a significant cost of subsidy for those heavily subsidized and those potentially receiving firm-specific duties. The intended benefits of industrial subsidies are partially offset by increased foreign trade protection: AD/CVD duties induced by subsidies reduced the subsidy effect on firm revenue growth by 22%.

Suggested Citation

  • Yusheng Feng & Haishi Li & Siwei Wang & Min Zhu, 2025. "Industrial Policy and Retaliatory Protection under the WTO: Lessons from China," CESifo Working Paper Series 11982, CESifo.
    • Handle: RePEc:ces:ceswps:_11982
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    Keywords

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy

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