IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_11982.html
   My bibliography  Save this paper

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 hidden cost of industrial policy under WTO agreements. At every stage of AD/CVD investigations, industrial 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 tariffs applied to all other firms exporting the investigated product. While AD/CVD tariffs 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. AD/CVD tariffs induced by subsidies reduced the subsidy effect on firm revenue growth by 25%. The intended benefits of industrial subsidies are partially offset by increased foreign trade protection.

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
    as

    Download full text from publisher

    File URL: https://www.ifo.de/DocDL/cesifo1_wp11982.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mauro Caselli & Jiuli Huang & Chiara Tomasi & Min Zhu, 2023. "Anti-dumping and product quality," Discussion Papers 2023-08, University of Nottingham, GEP.
    2. Ju, Jiandong & Ma, Hong & Wang, Zi & Zhu, Xiaodong, 2024. "Trade wars and industrial policy competitions: Understanding the US-China economic conflicts," Journal of Monetary Economics, Elsevier, vol. 141(C), pages 42-58.
    3. Stefano Schiavo & Chiara Tomasi & Min Zhu, 2021. "Anti-dumping activities against China: patterns and effects," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(1), pages 7-30, April.
    4. Blalock, Garrick & Gertler, Paul J., 2008. "Welfare gains from Foreign Direct Investment through technology transfer to local suppliers," Journal of International Economics, Elsevier, vol. 74(2), pages 402-421, March.
    5. Robert W. Staiger & Frank A. Wolak, 1994. "Measuring Industry-Specific Protection: Antidumping in the United States," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1994 Micr), pages 51-118.
    6. Rebecca Achee Thornton & Peter Thompson, 2001. "Learning from Experience and Learning from Others: An Exploration of Learning and Spillovers in Wartime Shipbuilding," American Economic Review, American Economic Association, vol. 91(5), pages 1350-1368, December.
    7. Harrison, Ann E, 1994. "An Empirical Test of the Infant Industry Argument: Comment," American Economic Review, American Economic Association, vol. 84(4), pages 1090-1095, September.
    8. Minho Kim & Munseob Lee & Yongseok Shin, 2021. "The Plant-Level View of an Industrial Policy: The Korean Heavy Industry Drive of 1973," NBER Working Papers 29252, National Bureau of Economic Research, Inc.
    9. de Souza, Gustavo & Hu, Naiyuan & Li, Haishi & Mei, Yuan, 2024. "(Trade) War and peace: How to impose international trade sanctions," Journal of Monetary Economics, Elsevier, vol. 146(C).
    10. Cerqua, Augusto & Pellegrini, Guido, 2014. "Do subsidies to private capital boost firms' growth? A multiple regression discontinuity design approach," Journal of Public Economics, Elsevier, vol. 109(C), pages 114-126.
    11. Cao, Linyi & Jiang, Helu & Li, Guangwei & Zhu, Lijun, 2024. "Haste makes waste? Quantity-based subsidies under heterogeneous innovations," Journal of Monetary Economics, Elsevier, vol. 142(C).
    12. Bruce Greenwald & Joseph E. Stiglitz, 2006. "Helping Infant Economies Grow: Foundations of Trade Policies for Developing Countries," American Economic Review, American Economic Association, vol. 96(2), pages 141-146, May.
    13. Robert Z. Lawrence & David E. Weinstein, 1999. "Trade and Growth: Import-Led or Export-Led? Evidence From Japan and Korea," NBER Working Papers 7264, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lane, Nathaniel, 2016. "Manufacturing Revolutions: Industrial Policy and Industrialization in South Korea," SocArXiv 6tqax, Center for Open Science.
    2. Nathaniel Lane, 2020. "The New Empirics of Industrial Policy," Journal of Industry, Competition and Trade, Springer, vol. 20(2), pages 209-234, June.
    3. Philippe Aghion & Jing Cai & Mathias Dewatripont & Luosha Du & Ann Harrison & Patrick Legros, 2022. "Industrial Policy and Competition," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 15, pages 349-380, World Scientific Publishing Co. Pte. Ltd..
    4. Cathrin Mohr & Christoph Trebesch, 2024. "Geoeconomics," CESifo Working Paper Series 11564, CESifo.
    5. Cheng, Lu & Mi, Zhifu & Coffman, D'Maris & Meng, Jing & Chang, Dongfeng, 2021. "Destruction and Deflection: Evidence from American Antidumping Actions against China," Structural Change and Economic Dynamics, Elsevier, vol. 57(C), pages 203-213.
    6. Mergele, Lukas & Hennicke, Moritz & Lubczyk, Moritz, 2025. "The big sell: Privatizing East Germany’s economy," Journal of Public Economics, Elsevier, vol. 242(C).
    7. Kang, Yankun & Ma, Xin & Xie, Mi & Zhong, Ninghua, 2025. "Innovation’s false spring: U.S. export controls and Chinese patent quality," Journal of International Money and Finance, Elsevier, vol. 150(C).
    8. Mohr, Cathrin & Trebesch, Christoph, 2025. "Geoeconomics," Kiel Working Papers 2279, Kiel Institute for the World Economy (IfW Kiel).
    9. Sami Ben Mim & Abir Hedi & Mohamed Sami Ben Ali, 2022. "Industrialization, FDI and absorptive capacities: evidence from African Countries," Economic Change and Restructuring, Springer, vol. 55(3), pages 1739-1766, August.
    10. Feenstra, Robert C., 1995. "Estimating the effects of trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 30, pages 1553-1595, Elsevier.
    11. Harrison, Ann E. & Rodriguez-Clare, Andres, 2009. "Trade, Foreign Investment, and Industrial Policy," MPRA Paper 15561, University Library of Munich, Germany.
    12. Maurizio Zanardi, 2004. "Antidumping law as a collusive device," Canadian Journal of Economics, Canadian Economics Association, vol. 37(1), pages 95-122, February.
    13. Ryan Chahrour & Rosen Valchev, 2024. "The Dollar in an Era of International Retrenchment," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 72(3), pages 1042-1080, September.
    14. Salman Haider & Aadil Ahmad Ganaie & Bandi Kamaiah, 2019. "Total Factor Productivity and Openness in Indian Economy: 1970–2011," Foreign Trade Review, , vol. 54(1), pages 46-57, February.
    15. Feng, Yao, 2011. "Local spillovers and learning from neighbors: Evidence from durable adoptions in rural China," MPRA Paper 33924, University Library of Munich, Germany.
    16. Alessandro Barattieri & Matteo Cacciatore, 2023. "Self-Harming Trade Policy? Protectionism and Production Networks," American Economic Journal: Macroeconomics, American Economic Association, vol. 15(2), pages 97-128, April.
    17. Metiu, Norbert, 2021. "Anticipation effects of protectionist U.S. trade policies," Journal of International Economics, Elsevier, vol. 133(C).
    18. Lin, Wenlian & Cao, Jerry & Zhou, Sili & Li, Yong, 2024. "Political affinity, multilateralism, and foreign direct investment worldwide," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 94(C).
    19. Aerni, Philipp, 2012. "Applying New Growth Theory To International Trade," Papers 415, World Trade Institute.
    20. Marie-Ange Véganzonès-Varoudakis & Arup Mitra & Chandan Sharma, 2012. "Are Reforms Productive? Explaining Productivity and Efficiency in the Indian Manufacturing," Post-Print hal-03058727, HAL.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_11982. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.